Bitcoin prices have been on the upswing since the end of July to retest highs achieved at the beginning of the year. So, will the current bull run continue in the medium term, or is the market headed to a bearish season?
To be able to deduce the direction of the Bitcoin market in the near term, it is imperative to understand the prevailing forces.
The Market is Recovering from the May to July Downtrend
Going back to the months between May and July when the Bitcoin market was in a recession, the plunge was the result of numerous market dynamics. Among the main suppressive factors at the time was Tesla CEO Elon Musk’s negative statements about Bitcoin.
In May, he announced the discontinuation of Tesla’s support for bitcoin payments due to environmental concerns. The negative declaration had a domino effect on the sector and caused Bitcoin prices to cascade. The panic selling that ensued also contributed to the market plunge. The market fell from a high of $58,238 to sub $36,000 figures within two weeks.
Panic selling was further compounded by a JPMorgan report which indicated that more institutional investors were shifting their money from bitcoin to gold to the former’s unpredictability.
The Chinese Factor
The other major contributor to the May – July downturn was the Chinese ban that saw financial institutions barred from providing crypto-related services.
The rule which was enacted in May was followed by a directive prohibiting cryptocurrency mining. According to Chinese authorities, cryptocurrencies have the potential to disrupt the Chinese economy and could be used in money laundering schemes.
The ban caused Bitcoin prices to plummet below the $30,000 mark within a week.
Why Bitcoin Prices are Climbing
The BTC market seems to be on a rebound, with prices breaching the $50,000 mark at the beginning of September. The bullish movement is largely driven by a change in market sentiment following a series of positive developments.
Among them is the resurgence of the crypto mining sector, which had been negatively impacted by the Chinese government ban. It led to the redistribution of miners to regions such as the United States and Kazakhstan. The latest changes have mollified investors shaken by the previous market descent.
The rejuvenation of crypto markets was also recently propagated by billionaire Elon Musk’s reassurance that Bitcoin and other cryptocurrencies that he holds would eventually flourish. Towards the end of July, he affirmed his position by underlining Tesla would accept BTC payments once again. He, however, appended a precondition and underlined that his company would only do this if Bitcoin mining were done using 50 percent clean energy.
So, Will Bitcoin Prices Climb in the Medium Term?
If all conditions remain the same, Bitcoin is set to retain its value until December, when prices traditionally fall. This is usually in tandem with the festive season when users liquidate their holdings for the holidays.
The trend is likely to continue this year. Last year was exceptional because the December season was bullish. It is worth noting that the upward movement coincided strongly with the stimulus checks handed out by the government. They boosted capital inflows into the BTC market and led to an increase in retail bitcoin investors.