New lows of Bitcoin

New lows of Bitcoin

2019-11-11 • Updated

Bitcoin had been in a stagnation for a long time. For more than three months, the price of Bitcoin hasn’t risen above $10,000 and hasn’t fallen below $6,000.  However, it seems like Bitcoin is going to break the consolidation times.

On June 12, Bitcoin broke the support at $6,500 and reached the lowest levels since April 1. Next day it tested the further support at $6,000. 50-day and 100-day MAs are moving down giving a negative signal to Bitcoin.

Let’s have a look at reasons that lead to a Bitcoin’s weakness.  

  • According to analysts, Bitcoin suffers such a huge volatility because of a small group that owns a great part of Bitcoin tokens. According to a research of the New York blockchain start-up Chainalysis, there is a group of 1,600 addresses that controls one-third of all tokens at the market (about $ 37,5 billion). In other words, such private tokens’ holding creates threats for Bitcoin as its price depends on a sentiment of the small group of investors.
  • The second reason may be hidden in the fair value of Bitcoin. Analysts suppose that market’s participants are trying to find a fair value of Bitcoin. That’s why the cryptocurrency is so volatile.
  • And of course, we can’t avoid the main reason that affects cryptocurrencies’ prices. It’s mass media and negative news about the cryptocurrency market. Constant news about stricter regulations, hack attacks on popular cryptocurrency exchanges and so on leads to a fall of Bitcoin. For example, Tuesday’s fall was caused by a hack on a South Korean cryptocurrency exchange Coinrail. Next day a study affected a Bitcoin price. According to it, highs of late 2017 were increased artificially by traders’ manipulation. However, some traders remain optimistic as negative news affected Bitcoin many times but it managed to recover.   
  • It’s worth saying that Bitcoin price is affected by an interest of traders. As soon as the price goes up, more people willing to buy it. As a result, the price increases even more. However, as Bitcoin remains highly volatile, people are scared to invest money in the cryptocurrency. Up to now, traders lost an interest to Bitcoin. According to Google Trends, searches on the word “Bitcoin” have decreased by more than 75% since the beginning of the year and approximately twice in the last three months. It is putting pressure on the digital asset.

A fall of the Bitcoin price creates danger for banks that hold bitcoin futures. 3 largest rating agencies Standard and Poor’s, Moody’s, and Fitch can lower the credit ratings of such banks because of the high volatility of Bitcoin. Although banks don’t participate in the cryptocurrency trading directly, they have an indirect impact on the market.


What about forecasts?

It’s extremely difficult to forecast the future of Bitcoin. We all remember that analysts predicted a strong rise of the cryptocurrency to $25,000 after the Consensus conference in April. However, the rise didn’t happen. The Fundstrat’s co-founder Tom Lee still remains bullish about Bitcoin. He believes that the digital currency will reach $25,000 by the end of the year.

However, other analysts are not so sure. According to their predictions, Bitcoin can reach only $14,300 by December 31.

As we can see, the forecast levels are much higher than the current position of Bitcoin. Up to now, the situation is unclear. Until Bitcoin stays above the psychological level of $6,000, there is a possibility of its rise. However, if Bitcoin breaks below $6,000 and $5,500, we can anticipate a further strong fall to $3,500.

Making a conclusion, we can say that Bitcoin is anticipated to remain at low levels for a long time. Media will continue to weigh on the Bitcoin price. Until Bitcoin gets a fresh wave of positive news, it is supposed to be weak.


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