The calm before the storm? Bitcoin could reach $20,000 in 3 months

Mohit Sorout says Bitcoin could reach a new all-time high within three months after the breakout from the current range

The price of Bitcoin (BTC) has been in a phase of consolidation within a narrow range for several months now. If the main cryptocurrency manages to break the upper limit, Mohit Sorout, founding partner of Bitazu Capital, says it could be close to a record high.

Since July 2020, Bitcoin has been constrained between $10,200 and $11,800, a range of 15%. The asset has been experiencing subdued volatility over a prolonged period, excluding some short-lived peaks.

When Bitcoin remains stable for a long time in a narrow price range, this usually results in strong movement.

There is still no certainty that a breakout will occur in the short term or not. But if it does, Sorout believes that BTC will reach $20,000 within three months.

Bitcoin daily chart with a trend line

Daily Bitcoin chart with a trend line. Source: TradingView.com, Mohit Sorout

Why three months for an ATH in Bitcoin after the breakout?
Based on previous price cycles, Bitcoin tends to move quickly after the breakout. The pattern historically applies both upward and downward.

From May 1 to July 20, Bitcoin fluctuated between $8,800 and $9,800, stabilizing at around $9,100. After two months of consolidation, it took 12 days to register a 32% increase, bringing BTC to $12,123 on Binance.

Considering Bitcoin’s tendency to see large peaks in volatility following prolonged periods of consolidation, Sorout commented:

„The calm before the storm. If $BTC were to breakout today, it would most likely reach its previous ATH of $20,000 within 3 months“.

When asked about the reasoning behind the three-month breakout, Sorout explained that it is based on a study of volatility.

According to Sorout, an increase to $20,000 could occur even in a shorter time frame:

„An observation based on the violence of movements following periods of limited volatility. It could even take less.“

An important variable to highlight is the decline in open interest in future markets compared to the bull markets of the past.

Due mainly to the accusations against BitMEX made by the US Commodities and Futures Trading Commission, or CFTC, overall open interest has decreased. This could lead to a more stable and gradual trend for Bitcoin, unlike previous bullish cycles.

BitMEX open interest from the beginning of the year to date

Open interest of BitMEX from the beginning of the year until today. Source: btctools.io

Factors that could reinforce BTC’s momentum in Q4 and during 2021
The considerable growth in institutional demand remains a strong narrative for Bitcoin’s bullish cycle towards 2021.

On 17 October, Barry Silbert, CEO of Grayscale, said the company achieved a new record in assets under management, currently at $6.4 billion. Silbert highlighted the „BIG inflows this week.

Institutions that have bought Bitcoin, such as Square and MicroStrategy, see Bitcoin as a potential treasury business. If so, it could mean that many institutional investors are accumulating BTC without the intention of selling in the near future.

The S2F model with the latest update

The S2F model with the latest update. Source: PlanB

In October, the price of Bitcoin was relatively calm despite positive news about institutional inflows. However, the creator of the stock-to-flow (S2F) PlanB has stated that over time we will probably see asymmetric returns:

„Why doesn’t the price of #Bitcoin go up with all these institutional purchases? Who is selling? The price of BTC is exactly where it should be, firmly above $10,000, waiting for the right moment… asymmetric returns… patience!“.

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