Bitcoin is staging a comeback that has taken it up more than 60% from the lows it hit in June, reviving the spirits for six-figure price targets that often emerge when the cryptocurrency benchmark is rallying.
The Crypto Upturn
The upturn came at a time when many analysts were predicting exactly the opposite — a bear cycle set to run to new lows within weeks. Some were even speculating the popular coin to trade below the $10,000 mark while heading into the last quarter of the year.
BTC price shoots from $29,000 up to $49,000
The dramatic downturn in the crypto markets came amid a flurry of negative headlines and catalysts, from China’s crackdown to wobbly remarks from Tesla CEO Elon Musk, amongst other factors.
But despite the huge drop in nominal value, the crypto ecosystem has remained resilient during its brief winter. What’s more, the transition from a bear market to a four-week bull run has been swift and efficient.
Early investors remember the crash at the end of 2017, which led to a “crypto winter” that lasted years. As such, May’s free fall had many wondering if this was the start of another bear winter or just a blip of a scare before the next record high.
The cryptocurrency market is now defying all bearish concerns including criticism over its mining toll on the environment and global regulators’ tougher crackdowns.
China, for one, banned financial institutions from providing services related to cryptocurrency transactions. In the US, policymakers are approaching the virtual asset class in a new way, with the SEC’s new chair calling the space the “Wild West. Despite providing a path to approve the first Bitcoin ETF, he wouldn’t compromise on protecting retail investors while setting out a regulatory framework.
Crypto investors are tossing those concerns aside for now and are, instead, worried about missing the bull run towards soaring price targets, which have long been a part of the investment thesis behind getting into the market.
The Technical Picture Matters
From a technical point of view, there are plenty of bullish signals to mark the moment.
Eventually, the downtrend had stalled around the $29,000-$30,000 price zone for about two months before coming out of the sideways position, ultimately taking off on an epic bull run. After several apparent attempts to push beyond this support, the sellers gave up, and the price moved upwards.
So far, though, Bitcoin is acting like $50,000 was a ceiling — it quickly retracted from that threshold and is currently trading around $48,000. It’s like investors collectively decided $50,000 was high enough for now that they’d be willing to take a breather at that price.
However, this slight correction to the downside makes sense, and perhaps investors are even setting automatic orders to resume buying in when it crosses that resistance.
Besides watching for which side of $50,000 the No.1 cryptocurrency stays on; technical traders are paying close attention to whether bitcoin is above or below its 200-day moving average. As long as bitcoin is trading above that indicator – a long-term momentum measure – the short-term prognosis is bullish. And if another bullish attempt fails at the $50,000 price, heading back to $45,000-$40,000 seems possible before another upswing.
If this proves true, it will confirm a resurgence of buyers, believing it is one resistance away from another attempt to climb to the record peak close to $65,000.
Summing up, the current stalling may indicate that a correction is underway, but the overall sentiment remains bullish from a long-term perspective. Looking ahead, we can see Bitcoin reaching $100,000 by the end of 2021, but potential crashes may occur down the road.
The fundamental concepts of bull and bear markets originating from the traditional financial assets have penetrated the cryptocurrency space to represent the tactics of animal attacks in wild nature.
Still, it’s not easy to predict whether cryptocurrencies will go up or down from here. At least it would remain prone to big swings in short timeframes.
The market’s extreme volatility over the last year was a perfect case study of the risks associated with crypto investing. Also, remember that cryptocurrency in many cases produces no yields and has yet to have its underlying business model. As such, it’s pointless to apply traditional Wall Street methods to come up with a value for what a digital asset should be worth.
Rather, it is really important to consider that cryptocurrencies are still speculative investments. Investors who are interested in crypto should rely on price analysis, and look at how market sentiment influences the price trajectory to predict where a cryptocurrency is going next.