Tesla Adoption Propels BTC/USD to Record Highs

Bitcoin, Elon Musk, Tesla, Inflation Expectations, BTC/USD – Talking Points:

Tesla’s adoption of Bitcoin as a form of payment has propelled the cryptocurrency to fresh record highs.
Rising inflation expectations may continue to bolster BTC in the near-term.
The break above Bull Pennant resistance hints at further upside for the anti-fiat asset.

Bitcoin prices surged above the $44,000 mark to fresh record highs, on the back of news that Tesla has invested $1.5 billion in the popular cryptocurrency and plans to begin accepting it as a form of payment. The California-based electric vehicle manufacturer stated that “we expect to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis”.

This should come as no surprise given Chief Executive Officer Elon Musk’s musings about BTC, commenting recently that “I think Bitcoin is really on the verge of getting broad acceptance by sort of the conventional finance people”. Musk has also previously enquired about the ability to convert large transactions of Tesla’s balance sheet into the anti-fiat asset.

Tesla’s move may provide further validation of BTC as a mainstream asset and intensify capital inflows in the near term. Moreover, the notable pickup in inflation expectations could ignite a more extended move higher, as coronavirus vaccination progress and the prospect of additional fiscal support fuels bets on a robust global economic recovery.

Data Source – Bloomberg

Bitcoin Price Weekly Chart – RSI Hints at Further Upside

From a technical perspective, the outlook for Bitcoin continues to hint at further gains as price surges above key resistance at the 200% Fibonacci expansion (42673).

With the RSI continuing to track in overbought territory, and the slopes of all 6 moving averages notably steepening, the path of least resistance seems higher.

Breaching psychological resistance at $50,000 would probably propel price to test the 261.8% Fibonacci (54865), with a convincing push above bringing the $60,000 level into play.

However, if price fails to remain constructively perched above 42,000, a short-term pullback to the 8-EMA (35226) could be in the offing.

BTC/USD weekly chart created using Tradingview

Bitcoin Price Daily Chart – Bull Pennant Break to Intensify Buying Pressure

Zooming into the daily chart reinforces the bullish outlook depicted on the weekly timeframe, as price surges above 42,000 to begin probing the Descending Triangle pattern’s implied measured move (47699).

Ultimately, the continuation pattern could prove to be a Bull Pennant formation, which suggests that price could climb an additional 29% from current levels to challenge the 60,000 mark.

However, if 48,000 successfully neutralize buying pressure, a short-term pullback to former resistance-turned-support at the January high (41969) could be on the cards.

BTC/USD daily chart created using Tradingview

IG Client Sentiment Report

The IG Client Sentiment Report shows 75.35% of traders are net-long with the ratio of traders long to short at 3.06 to 1. The number of traders net-long is 4.61% lower than yesterday and 4.14% lower from last week, while the number of traders net-short is 16.11% higher than yesterday and 65.01% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall.

Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.