Market Cap: $645,019,409,702 | 24h Vol: $180,874,316,617 | BTC Dominance: 66.5%

Bitcoin rallied to a new all-time high last week, as a number of bullish fundamental news developments caused the first cryptocurrency to smash past the psychological $20,000 level.

BTC found resistance from just below the $24,300 level, following a $4,000 rally after Bitcoin broke past it’s former record high, around the $19,900 level.

The breakout above $20,000 caused a flurry of activity on social media channels. Twitter alone registered over 182,000 tweets about BTC breaking $20,000 just hours after the historic event took place.

Bitcoin also received a major boost over positive comments coming from Washington, as reports suggested that Republicans and Democrats were moving closer to agreeing a new U.S. economic stimulus package.

The December FOMC policy meeting was also seen as being positive for Bitcoin, as the US central bank announced that they remained committed to its current QE4 programme.

Market participants also factored in that the ongoing record rise in new COVID-19 infections could mean the Federal Reserve will need to maintain it’s massive bond buying programme well into 2021.

Bitcoin continued to rally on the news that a major investment firm from the United Kingdom was preparing to deploy over $700 million into Bitcoin.

One River Asset Management also announced that they had invested $600 million into Bitcoin last month, beating even Microstrategy in terms of the amount of BTC investment.

Bitcoin also saw record amounts of interest of open interest on the futures and options market prior to the breakout above the $20,000 level.

The crypto market struck a slightly more cautious tone towards the end of the trading week, as traders feared the much-hyped new digital asset wallet regulations could be announced at any moment.

The Crypto Fear and Greed Index also remained at a record high, as the market remained in a state of  “extreme greed” above the $20,000 benchmark level.

The crypto total market capitalization rallied to a new multi-year high this week, hitting $678 billion, as Bitcoin’s surge caused the crypto total market cap to swell.

Litecoin was the best performing top altcoin last week, even outpacing ETH in terms of weekly gains. LTC also continued to enjoy huge trading volumes on the cryptocurrency exchange Binance.

During my upcoming webinar I will be looking at Divergence strategies, and I will also be charting Bitcoin (BTC), Ethereum (ETH),  Litecoin (LTC), and Chainlink (LINK).

The Week Ahead

As I noted last week, we should know which way the market will break once the $19,600 to $18,400 range is broken, and that really was the story of the week. Once BTC definitively cracked $19,600 level bulls never looked back.

The question becomes, will BTC retrace back towards $20,000 before we start to see another major rally. I think the answer really lies in how seriously the market is taking this new strain of COVID-19.

Without a doubt, if we saw this new mutation taking hold in the U.S., then BTC would take a big tumble.

Crypto markets have also been quite dismissive of the latest stimulus package being announced. Currently, it seems to be a case of buying the rumor and selling the fact.

Something that is going under the radar is Bitcoin’s reaction to a Biden Presidency. I have noticed that everytime new news comes about Biden inching closer to the White House, Bitcoin starts to rally. The recent electoral college vote was a prime example.

I think investors are expecting more lockdowns and major U.S. dollar depreciation under Biden, so my general feeling is that Bitcoin is probably headed much higher if Biden is inaugurated in January. But we could correct further in the short-term for sure on this latest bearish COVID development.

In terms of what to look out for this week on the economic calendar, Core PCE inflation from the U.S. economy is also going to be important. A lot of economists continue to warn “inflation is coming”, so don’t be surprised when it does, and BTC starts to react to rising inflation.

The technicals surrounding Bitcoin (BTC) look fairly bearish in the short-term, and a head and shoulders pattern is currently in play.

According to the overall size of the pattern, it is predicting that BTC could drop towards the $20,400 area, although I would not be surprised to see BTC dropping to the $19,900 area.

This makes a lot of sense, and we could see some new money looking to enter from the $20,000 region, in expectation or further upside towards the $25,000 area.

Given the scale of the multi-week bull run in BTC, I am very careful about predicting a top. However, if we fall below $19,400 and start to hold, I would expect an almighty drop towards the $16,400 area, and probably much-lower.

Traders that are bearish towards BTC will probably try to see rallies back towards the $23,200 to $23,400 area. Again, I remain cautious playing either side. Better to be short from the current yearly top, and attempt buys close to the $20,000 area.

Ethereum (ETH) has fallen quite sharply after finding strong resistance from around the $670.00 area. I would not be surprised to see ETH/USD falling further from here.

A rising wedge pattern is indicating that ETH/USD is about to take a further tumble, and could be headed back towards the $490.00 area.

It must be said that traders who are bullish towards ETH/USD may attempt buys around the $570.00 area, so do be careful shorting around this region.

At the moment, I would rather be short than long. This may seem strange as ETH/USD is obviously very bullish both fundamentally and technically.

More conservative traders may await for ETH/USD to reach the $770.00 area before attempting such a risky short play.

Once again, traders that are bullish, regardless of the recent pullback, may attempt to buy ETH/USD around the $570.00 area, in anticipation of a coming rally towards the $770.00 area.

This scenario is certainly possible, although we really have to watch BTC, and guage the market reaction to the new strain of COVID-19.