Will The Cryptocurrency Market Recover By Christmas?

Is the cryptocurrency market set to stage a rebound, perhaps by Christmas? And if so, why could this happen, and is now a good time to stick or twist?

It’s the question on every market participant’s lips at the moment.

There are different answers and a wide range of opinions to those questions, so probably better to take the story back to the beginning.

Throughout the second half of 2020 and the start of 2021, Bitcoin had a stellar bull run as a number of high-profile investors touted the primary cryptocurrency as the new gold.

The most notable milestone was the integration of the virtual asset class within PayPal’s payment infrastructure. This was followed by Tesla CEO Elon Musk expressing his enthusiasm for cryptocurrencies, boosting prices of Bitcoin, altcoins, and, most notably, Dogecoin.

At the time, things only looked like getting better for the cryptocurrency market on the back of adoption among more established financial firms.

What’s Behind the Latest Drop?

After hitting never-before-seen highs in April, topping $61,300, Bitcoin and the wider cryptocurrency market plummeted dramatically in May and June, seeing billions wiped from their value.

This crash came after a series of hammer blows, initially triggered by China announcing a crackdown on cryptocurrency mining and trading. Beijing authorities banned all of its financial institutions and banks from offering locals any services involving digital assets.

Things just got worse after Elon Musk revealed that Tesla would no longer accept Bitcoin as payment for its products.

The free fall saw the Bitcoin price plummet to $28,600 in June – around half the record high it set back in April.

Why did Cryptocurrencies Bounce Back – Latest Rally Explained

Bitcoin price bottomed out in late July. At this juncture, the crypto market enjoyed a fruitful four weeks which saw its value skyrocket by more than 60%.

Zooming out further, the recent rally was sparked by US banks jockeying to offer their wealthy clients access to trade Bitcoin funds. Wells Fargo, Morgan Stanley, JPMorgan, amongst others

have floated plans to get involved in cryptocurrency investments, as the soaring interest by institutional investors garners attention on Wall Street.

Also, U.S. regulators have revived the asset managers’ hopes to create the first bitcoin exchange-traded fund after the SEC’s new chair signaled a path to approval. So far, the securities regulator has rejected or delayed a decision on all crypto ETF proposals. Ali Raza, technology and crypto reporter at several blockchain publications noted:

“Following the mid-May price crash, many suspected that we are entering a new bear market. However, as we have seen over the last week or so, the market has seen significant recovery which is unlikely to happen during bearish periods, and it is too early for it to have ended. While the price behavior signals that a bumpy ride is ahead of us, this might be just an exaggerated summer dip that the market is slowly recovering from,”

All told, the bullish scenario suggests that bitcoin is likely to set a strong bull run that takes out the $60,000 resistance and prints a new all-time high at $100,000 in the mid-to-long term.

Will it Continue to Fall?

Whether the market will recover to near the record highs it enjoyed in April remains to be checked, it all depends on plenty of factors affecting the space.

Yet, this bullish view is not shared by other analysts, who warned that other countries could follow China in cracking down on crypto activities.

Most recently, financial regulators in Europe and Asia have targeted Binance, the world’s biggest cryptocurrency exchange. Some have banned the influential platform from offering derivatives trading business, while others warned it was unlicensed to operate or not in compliance with its AML laws.

In the long term, skeptics still question whether cryptocurrency offers any economic value and that its real-life adoption by businesses or retail users is highly uncertain, to say the least. These are also pointing to growing concerns around the crypto mining’s energy use, which would only bring in further scrutiny that ultimately drags down prices.

Will the market recover by Christmas?

As cryptocurrencies had seen a huge resurgence over the last year, it was widely felt that the asset class was maturing, and its extreme volatility would be less frequent. Unfortunately, this wasn’t entirely true.

The recent volatility was caused by a combination of factors that may have made these ups and downs more severe. From excitement about Coinbase IPO, to China’s latest crackdown and wobbly remarks from Elon Musk, the accumulated response made the market reactions more violent.

For those who invest in crypto because they truly believe in its long-term potential, swings like this are to be expected and are nothing to be overly worried about.

If you think Bitcoin has a bright future, avoid checking your portfolio during market dips. Just hold onto your investment regardless of whatever chaos it may experience.

From a short-term perspective, crypto dealers are gearing up for a so-called Santa rally which historically occurs in the last week before Christmas. Many are hoping the holiday season that kicks off in a few weeks will help cryptocurrencies finish the year on a high. Ali Raza

“Excluding December 2018, the market has historically always seen a surge around Christmas, so there is a high likelihood that this could happen again. Of course, little is certain when it comes to the crypto industry, and a single negative event could significantly turn the tide. With that said, adoption continues across the globe and everything indicates that crypto usage should continue to grow, possibly accompanied by the prices,”

Cryptocurrency will likely experience many more rallies and crashes over the years. Probably the best advice is to keep your cryptocurrency investments to under 5% of your total portfolio, and only put in what you’re comfortable with losing. If you’ve done that, then don’t stress about price swings, because they’re going to keep happening.

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