Is Bitcoin’s Bump Signaling a Bottom?
It’s been a tough year for Bitcoin (BTC).
The world’s most valuable cryptocurrency went from trading for almost $20,000 in late 2017 to barely above $4,000 currently.
A year ago, Bitcoin had a market cap of over $313 billion. Now, it's capped almost at $71 billion.
Overall, the cryptocurrency market cap has dropped something like $700 billion this past year.
Last week, Bitcoin received some much-needed relief. Its price went from about $3,100 to over $4,000, a gain of over 20%.
During that time, there was also a noticeable spike in BTC selling off.
Are people selling BTC because they’ve lost confidence in the coin? Is “the people’s currency” reaching a bottom? Is this the beginning of the end for Bitcoin and cryptocurrencies?
This week, I’ll examine if Bitcoin’s recent price bump is an indication of misfortune for investors or a fine opportunity to win.
The Bear Continues to Rage
To some, BTC’s bump may be telling us that the cryptocurrency is still in the midst of a bear run.
Bitcoin’s been bearish all year. Indications that a security has entered a bear market include a few things...
First, prices fall and investors lose their optimism for the security. Bitcoin has steadily dropped in price since its December 2017 glory month.
Second, a security has entered a bear market when it’s dropped over 20% in an eight-week span. Bitcoin has dropped over 80% since last year.
Third, securities in a bear market are sold in high numbers, as investors lose confidence in the security and decide to sell, preventing or mitigating their losses.
Here’s where Bitcoin’s recent price bump comes into play. It shot up over $900 in several days, exciting investors. Some, however, could see the bump as their chance to sell and make off with a smaller overall loss.
If investors are still bearish on BTC, the market will see the crypto continue to drop in price as it accumulates further pessimism.
Let’s hope the honey’s all gone and BTC’s bear run goes into hibernation.
Winter has come, after all.
The Waking Wild Bull
On the other hand, Bitcoin’s bump may be indicating an upcoming bull run.
One characteristic of a bull market is increased share prices, typically over 20%, after a price drop of similar percentage. BTC certainly fits that mold, as it shot up that much last week and hasn’t dropped 20% since.
In regards to BTC selling off like crazy, it may have been because of stop-losses — automatic selling of a security at a certain price. Investors may have put stop-losses for BTC at $3,500 or even $4,000, which would have triggered when the crypto reached those prices last week.
A wave of stop-losses could have been the reason for BTC’s high selling last week, not an exodus of tapped-out investors.
Remember, we’re in Q4. What common holidays are held during this time?
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Thanksgiving, Hanukkah, and Christmas.
People are gathering during those holidays and talking about a plethora of subjects. Cryptocurrency has been a dinner table topic for years now, becoming even more known as time passes.
In a bull market, optimism for a security is high, which causes it to be touted more and more often. Eventually, people will hop on board and start buying. With increased demand and little change in supply, the security will get snatched up by new investors and rise in price.
With BTC’s all-time high being almost $20K and being currently close to its all-time low, this could be the red muleta that the bullish need to hop on the coin.
Time Will Tell
This sounds terribly cliché, but time really will tell Bitcoin’s fate.
Bitcoin and other cryptocurrencies need an explicit intrinsic value. Investors and supporters are hard-pressed to point one out, making the market more speculative and unappealing to people unfamiliar with cryptos. The market needs more time to locate that value and subsequently return its lost optimism and bullishness.
Also, it’s far too early to tell if BTC’s recent bump will call for a longer bear run or an actual crash. Since BTC hasn’t dropped over 20% since its bump, it could actually be in the beginning of a new bull run.
But then again, it’s also too green to state that Bitcoin’s in a bull market, as analysts can’t really make that call until more time has passed.
It looks like Bitcoin still has a chance. Let’s enjoy the end of 2018, spend time with loved ones, count our blessings, and look forward to what 2019 has in store for Bitcoin.
John Butler, Jr.
Contributing Editor, The Token Authority