BTC becomes legal tender in El Salvador: 5 Bitcoin developments to watch this week

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Monday begins with a positive leap of faith, with Bitcoin breaking through the $51,000 barrier level and poised to become an official national currency for the first time.

Bitcoin (BTC) begins the new week in a new price range above $51,000 – has it overcome critical resistance?

Bulls are now aiming $54,000 and higher as the weekend’s BTC price action shifted from sideways to spike.

Given how tough it has been to hold $50,000 for any length of time over the last month, let alone outbid sellers at $51,000 and above, anything is possible in the coming hours and days.

With everything to play for, we takes a look at five factors worth considering when deciding on where Bitcoin may go next.

Have $51,000 sellers been beaten?

Analysts have referred to it as “crucial” and the “last obstacle” – Bitcoin has now surpassed $51,000.

The transition took a long time – numerous attempts to break $50,000, a psychological barrier in of of itself, all failed to convert it to support. The volume of sellers above the range proved simply too much for bulls, who had previously struggled to maintain higher levels.

The night between Sunday and Monday, however, shifted the paradigm, as BTC/USD eventually surpassed $51,000 for the first time since mid-May. Now the question is, “Can it hold?”

For some, the solution is self-evident.

“Targeting $54K,” analyst William Clemente summarized just before the real momentum took hold overnight, and Cointelegraph contributor Michaël van de Poppe described a $51,000+ BTC as “great.”

In the event, BTC/USD hit highs of just under $52,000 before cooling and consolidating near that peak.

BTC/USD buy and sell levels (Binance) as of Sept. 5. Source: Material Indictors/Twitter

This places the pair at the very top of the resistance wall, with only $52,000 remaining as a meaningful hurdle before much easier conditions for bulls return.

“There’s a vol gap here which is just air. Thus price could move quickly,” an excited Pentoshi added, analyzing the current spot price setup.

“Price is also above the PoC. Buyers in control.”

Pentoshi previously argued that $50,000 in fact had little sway as a technical landmark. But $48,700, he said on Saturday, was important to hold as a daily close in order to secure further upside.

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BTC/USD 1-day candle chart (Bitstamp). Source: TradingView

El Salvador adopts Bitcoin

This week, Bitcoin will become legal tender of a sovereign state for the first time in history, in a less technical but equally historic event.

El Salvador will formally begin adopting Bitcoin as its national currency alongside the US dollar on Tuesday.

Despite strong warnings and even demands from the International Monetary Fund and others, the country’s president, Nayib Bukele, has stood firm. Bitcoin and its acceptance will now embark on a huge new experiment.

“As El Salvador takes a massive technological jump into the financial future, before any other country, there are bound to be mishaps,” Alex Gladstein, chief strategy officer at the Human Rights Foundation, said in a series of tweets about the topic.

Gladstein cited political moves by Bukele’s government among other problems, which make Bitcoin adoption an interesting chapter in the country’s history. On a personal basis, however, the benefits for any Salvadoran remain obvious.

“For Salvadorans who are open-minded and willing to put in work to understand Bitcoin it could yield enormous fruits,” he added.

Meanwhile, a movement currently gathering steam on social media involves Brazil, where the Bitcoin community plans to each buy $30 of BTC in support of the law.

El Salavdor’s government passed a motion to create a $150-million Bitcoin fund last week.

Bitcoin on track to seal fourth straight difficulty gain

Bitcoin price action continues to be supported by fundamentals tha refuse to give up the pace of gains.

In just under two days’ time, the next automated readjustment will add an estimated 2.5% to Bitcoin’s difficulty, marking a fourth consecutive increase.

As previously reported, this will be the first such occurrence since February, when Bitcoin broke $50,000 for the first time.

An significant indicator of miner activity and possibly Bitcoin’s most important feature, difficulty adjustments show no signs of slowing in an extraordinary return to form that began after the Chinese miner rout in May.

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Bitcoin difficulty chart. Source: Blockchain.com

Alongside, the hash rate also continues to rebound, passing 130 exahashes per second (EH/s) this weekend and now just 37 EH/s below its all-time highs.

Fresh entry of hardware from relocating and newly active miners has given the hash rate a major boost — at its lows, the metric was at around half of its 2021 peak.

Stock-to-flow points to $100,000 by Christmas

The start of a new month necessitates an update to one of Bitcoin’s most accurate price prediction models, the stock-to-flow (S2F) family.

Despite the fact that BTC/USD remains considerably below the model’s technical day-to-day target, its developer, PlanB, correctly predicted August’s monthly closing of $47,000.

With a minimum closing of $43,000 expected in September, the analyst stated that a $100,000 average price later this year was still within reach.

“Baseline S2F forecast of $100K by Christmas still stands (or more precise: $100K average for this halving period 2020–2024),” he tweeted Sunday alongside a chart.

“On-chain (non-S2F) indicator shows no sign of a top yet (no red dots). This is in line with S2F forecast.”

With that, Bitcoin has entered the “orange” phase of the model last seen in an upward price surge in the second half of 2017. BTC price action, PlanB stated, is thus acting “like clockwork.”

“I think we go much higher than $100,000,” he added on the prognosis for the current halving cycle, which ends in 2024.

Bitcoin stock-to-flow chart. Source: PlanB/Twitter

Extreme greed is back

Those concerned about a Bitcoin price rally biting off more than it can chew may yet be proven right.

According to sentiment gauge the Crypto Fear & Greed Index, traders are already back in the “extreme greed” mindset.

Fear & Greed is thus only 16 points away from its historical high zone, which has spurred corrective swings in the past, with a score of 79/100.

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To avoid hitting it too soon, BTC price growth must be moderate and steady, and an impulse move may still prove unsustainable.

Despite this, the Index reached 79 in August and has hovered between 70 and 80 for the past four weeks.

 

Crypto Fear & Greed Index. Source: Alternative.me

Funding rates contribute to the sense of expectancy, with rates substantially lower than when BTC initially broke $50,000 earlier this year, with far less enthusiasm than in April.

In other words, traders are much more cautious, if not negative, this time around as the market attempts to recapture the $50,000 level. However, this may increase the likelihood of a short-squeeze and additional upside for Bitcoin in the following days.

 

Bitcoin funding rates chart. Source: Bybt

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