Can Bitcoin sustain its position above $5,000?
This is the first time in 2019 that the crypto markets have been in this state.
What goes up must come down.
But Bitcoin has so far defied this rule by sustaining its stunning 2 April rise to the key $5,000 mark.
As you can see, the voracious trading that followed the spike has returned volatility to the markets. Importantly, in all this frenzied trading, Bitcoin has managed to sustain that rise for a full week, while trending broadly upwards.
The volatility and ongoing trading upwards is very unlike anything else that's happened so far in 2019.
So why is it doing this? What's sustaining its ongoing rise and can it hold?
Because reasons
Bitcoin's lifespan has been a history of big ups and downs, with every peak and trough being higher than the previous one. For anyone of the opinion that Bitcoin's historical performance is definitely an indicator of future performance, the name of the game is to sell each peak and buy each trough.
And months before this big move, the Bitcoin markets were flashing almost every single historical indicator of being at the bottom of that trough.
The problem is that everyone knows past performance doesn't guarantee future performance, although it might imply it, so no one was taking those predictions to the bank. They would need some kind of sign from the crypto gods before jumping in. The big jump on 2 April may have been the sign they were waiting for.
This represents a massive shift in expectations among market participants, and you don't even need that much of a sign to quite dramatically shift the entire vibe of the market.
Think about it. Even if only 20% of active traders start thinking it's time to start holding back their supplies for future rises rather than selling now, you have a significantly reduced supply of Bitcoin. This is enough to tip the market scales to the bullish.
This re-introduces FOMO, which brings some new entrants to the marketplace and further tips the scales to the bullish. This is exacerbated by a resurgence in media coverage from outlets which notice that people are getting back into this Bitcoin thing and that they might be able to get a bunch of traffic from covering it again.
Then one thing leads to another and long story short, you have $20,000 Bitcoin... or so the theory goes.
But past performance does not guarantee future performance. And even if it does, there's still precedent saying that big pumps like the markets saw on 2 April will readjust with a massive downwards swing not long after.
This is being borne out by other flavours of technical analysis that are saying Bitcoin is overbought and due for a lurching readjustment. This is also echoed in the very technical and somewhat outdated Bitcoin bullishness chart below.
It was a full 75% bullish in mid-March, then a lot of that bullish energy was exhausted in the big rise on 2 April. That said, it's still looking more bullish than most of the preceding year. Bull market percentage in this case refers to what percentage of Bitcoin orders on a select set of exchanges are buy orders. Make of it what you will.
But it called the rise quite solidly and now seems to portend a pullback.
Plus, traders are probably a little more cautious this time around because a lot more people got burned in 2018 than did in Bitcoin's previous crashes. But burns or no, it's hard to look away from a fire.
Disclosure: The author does not hold any cryptocurrencies at the time of writing.
Latest cryptocurrency news
- Bitcoin’s price makes comeback despite Fed announcing potential interest hike in March
- Ethereum price recovers as its governing foundation reveals new rebranding strategy
- Solana in 2022: Key dates, roadmap and predictions
- The crypto market has lost $1.5 trillion in value — time to buy?
- What happens if Russia bans crypto?
Picture: Shutterstock
