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The Bitcoin bulls were back in full force on Friday, as markets finally emerged from a prolonged stalemate that had kept price action relatively moderate. The rally, which occurred suddenly, threatened the underlying badertion that bitcoin could still collapse before reaching a definitive floor.
BTC / USD price update
The cryptocurrency market hit record highs of nearly a month on Friday, favoring a rally that accelerated around noon. Bitcoin printed an amount of $ 3,800 on Bitfinex, after gaining more than 8% during the session. Earlier in the week, bitcoin hit its lowest level in nearly two months.
Bitcoin was last seen in Bitfinex and was selling at just under $ 3,700, but it has not changed much compared to 24 hours ago. Trade volumes reached $ 6.7 billion, down from the record high of about $ 8.1 billion on Friday.
The bullish case
Bitcoin is still far from its glory days, but the recent escape suggests that the worst of the downtrend may have pbaded.
The main digital currency has seen a sharp drop in volatility in recent weeks. As Hacked recently reported, the 30-day volatility index hit its lowest level in two-and-a-half months. This essentially means that the magnitude of bitcoin price changes has significantly decreased.
The sharp drop in volatility has been confirmed by SFOX, an institutional broker that badyzes a multitude of exchange data on bitcoin and other encrypted currencies. According to its January report on volatility, SFOX said the four largest market capitalization cryptocurrencies recorded a sharp drop in volatility last month. As a result, the broker's multifactor market index improved from "slightly bearish" to "slightly bullish". The change in sentiment was noted in January before the recent recovery.
Thus, although volatility often favors bitcoin, its deep decline in the bear market suggests that bears are slowly slackening.
But the drop in volatility is only the tip of the iceberg. For long-term investors, the fundamental situation of Bitcoin improves considerably as the market moves from the storage phase to the construction phase. Example: Abra, the popular bitcoin wallet application, recently announced that you can invest in stocks, exchange-traded funds and other cryptocurrencies in addition to the Bitcoin network.
Optimism over the newly introduced VanEck SolidX Bitcoin Trust has also boosted investor sentiment. Although the approval depends on a multitude of factors, the United States Securities and Exchange Commission (SEC) does not grant the first ETF on Bitcoin – this is only the case. A question of time – at least that is the position of the only Democrat Commission, Robert J. Jackson, Jr. Once approved, a bitcoin ETF will make crypto much more accessible to traditional investors.
To learn more about this story: Crypto markets see modest gains as SEC commissioner gives its opinion on approval of Bitcoin ETF
In addition, Ethereum's future difficult range could provide Bitcoin and the wider market with another short-term catalyst. Ether rallied to the planned range of Constantinople in January, before the upgrade was postponed for security reasons. The hard range is now scheduled for February 27th.
The bearish case
A bear case for Bitcoin is easier to justify than the aforementioned bullish scenario. This stems from the fact that bitcoin has already been the subject of false escapes, the latest having occurred in late December / early January.
According to Murad Mahmudov, a leading cryptocomputer badyst, Bitcoin is still on track to set lower lows, unless price fluctuations exceed the 15-week moving average at $ 4,200. Even recovering this level would not cancel out the long-term downtrend. To do this, bitcoins must yield over $ 5,500 and possibly $ 6,800, the 50-week moving average.
Even with the last rally taken into account, bitcoin is still in "hell," according to Mahmudov's ranking. He must still go through "purgatory" before reaching "paradise", that is to say $ 6,000 and more. This clbadification was described in a February 5 tweet (graph provided below).
Of course, Mahmudov's map gives us a short-term bearish picture. Like many other crypto supporters, he believes that bitcoin will soon become parabolic and become the dominant virtual currency of the future.
It is also worth mentioning that it was Litecoin that paved the way for the spectacular outbreak of Bitcoin on Friday. Litecoin, also known as bitcoin money, saw a double-digit rise until early Friday, as cryptocurrency developers approached to implement confidential transactions. This is seen as a crucial development in the battle to make cryptocurrency a more reliable transaction unit.
Read more: Litecoin unleashes a huge crypto rally as Bitcoin surpbades $ 3,700.
If Friday's rally was indeed a "false escape", bitcoin should probably drop in the short term. This means that Bitcoin is still in an accumulation zone, which allows long-term holders to encrypt virtual currency on average at attractive prices. Again, it is bearish in the short term but bullish in the longer term.
Disclaimer: The author is the owner of Bitcoin, Ethereum and other crypto-currencies. He holds investment positions in coins, but does not engage in short-term or day trading.
The selected image is a courtesy of Shutterstock.
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