Bitcoin price rises dramatically but technicals suggest more bleeding
Experts believe BTC's current spike is just one of many fakeouts that have been witnessed over the last 8 months.
- The total capitalisation of the digital asset sector stands at AUD$1.4T (US$960B) with the Bitcoin share of the market laying at 43.1%.
- BTC's weak technicals (such as its 200 weekly moving average) could result in the currency slipping as low as AUD$17.5K (US$12K) over the coming month.
- Many crypto mining firms have shut down — or at least scaled back their operations — due to the recent market turbulence.
Bitcoin's value has been rising for nearly 48 hours, with the digital currency jumping from a relative low of AUD$29K (US$20K) to approx. AUD$32.3K (US$22.1K) before showcasing a minor correction. BTC's weekly gains stand at +12.7% while trading at AUD$32,210 (US$22,005).
The positive momentum comes at a time when reports show that the US job market is experiencing a massive lull. As per Jamie Cox, managing partner at Harris Financial Group, this is a sign that "the pressure on wages may have now peaked" giving the Federal Reserve leeway to finally scale back on its ongoing series of interest rate hikes. If this turns out to be the case, investors may once again feel confident in putting their money into risk-based assets such as crypto.
While retail investors are beginning to feel bullish once again, analysts have noted that similar price jumps have been noticed many times over the last 8 months. In their view, this latest spike is just one of many fakeouts that may result in traders believing that a bottom is finally in, even though Bitcoin's fundamentals continue to remain extremely weak.
BTC recently exhibited a technical pattern formation referred to as a "pennant" suggesting that if it is able to break and stay above AUD$33.6K (US$23K), then the currency could be in for a major trend reversal. In terms of a bottom, there is a chance that volatility may strike again and take Bitcoin down to $12,000.
Bitcoin's 200 week moving average (WMA), a popular metric used to gauge an asset's market bottom as well as identify buying opportunities, is not doing well. Bitcoin is currently below the above said trendline — only for the 4th time in its decade-old lifecycle — suggesting that it may take a while for a full recovery to take place.
Bitcoin miners are going kaput
A growing list of Bitcoining mining firms are fast seeing red, with Compass Mining being the latest casualty. The company's CEO Whit Gibbs and chief financial officer Jodie Fisher recently put down their resignation papers after the firm failed to pay massive overdue electricity bills (estimated to be worth hundreds of thousands of dollars).
Reports suggest that many industrial-size Bitcoin miners have been faced with growing debt and have had to leverage their equipment as well as BTC holdings to stay afloat. It is estimated that miners owe some $4 billion in loans with more pain potentially in store for them.
Disclosure: The author owns a range of cryptocurrencies at the time of writing