The price of bitcoin is back in the spotlight, but following weeks of sky-high gains, market observers are beginning to assess what could be next.
After hitting two-year highs earlier in the week, bitcoin prices fell notably entering Wednesday, nearing correction territory after enjoying a sharp rally. However, several market observers asserted this decline was only temporary, and that the price could push its price higher in the coming weeks.
Experts pointed to a number of factors, including rising volatility, the coming decline in bitcoin rewards, falling bond yields and the looming possibility of a ‘Brexit’.
Combined, market observers believe that bitcoin prices have only experienced a ‘temporary pullback’, and that future price appreciation remains a strong possibility.
Support persists
Though hovering at a press-time total near weekly highs, the price of bitcoin has been on the move over the past few days.
The digital currency fell to a low of $661.60 on 14th June, after reaching $719.85 the day before, CoinDesk USD Bitcoin Price Index data revealed. This represented a decline of more than 8%, just short of the 10% drop required to signal a correction.
However, this $661.60 low seems to have represented strong support, as bitcoin prices then began a steady climb, hitting an intraday high of $691.70 by 20:45 UTC, according to BPI figures.
Petar Zivkovski, director of operations for bitcoin trading platform Whaleclub, told CoinDesk that he believes this action has established $660 as a key price indicator.
Zivkovski told CoinDesk:
“$660 is now very ‘hot’ support. [The] price pumped almost $30 quickly after touching that level.”
Confidence high
Even as prices fell, Zivkovski said Whaleclub observed that this didn’t correspond to an increase in short positions.
“Rather, traders adopted a neutral position with the aim of buying at lower prices, creating support and limiting downside,” he continued.
This is different from what could have been observed should the market have been fearful the price would fall. In this scenario, Zivkovski said shorts would have likely risen sharply as a sign of future expected losses.
Other market experts said such fluctuations are inevitable, especially as the price tries to solidify support in a new range.
“It is important for traders to understand that markets are always following cycles,” Joe Lee, founder of derivatives trading platform Magnr, told CoinDesk, adding:
“Regardless of the asset type, if a price increases too quickly, the safe assumption is that a correction will occur in the short term.”
Xu Qing, a spokesperson for China-based bitcoin exchange Huobi, provided a similar assessment, emphasizing that temporary price declines are normal and predicting that bitcoin will continue to fluctuate in the coming days.
‘The perfect backdrop’
Going forward, several developments could help place upward pressure on bitcoin.
Market expert Arthur Hayes went so far as to describe a combination of macro-economic factors that he believes will provide “the perfect backdrop” for continued price gains.
“Global macroeconomics is heating up,” noted Hayes, co-founder and CEO of bitcoin leverage trading platform BitMEX.
Another variable that could impact bitcoin prices is the looming possibility that the UK could exit the European Union, and Hayes recently singled this out as a factor that helped bitcoin prices rally over the weekend.
Key role of halving
Still, all eyes are fixed on mid-July, when the real test for the price will come to pass.
Market observers expect the halving to play a major role in demand through virtue of reducing the available supply of new bitcoins minted each day by 50%.
“There’s been so much talk around the halving that it’s built up all this hype which is in turn causing a lot more speculation,” said Bitfinex director of community Zane Tackett.
Zivkovski stated that “the backdrop of the bitcoin halving” is “ensuring that market sentiment remains bullish and resilient” to temporary price declines.
A handful of market experts went even further in emphasizing the importance of the halving, asserting that bitcoin prices will remain range bound until after this event takes place.
Rik Willard, founder and managing director of Agentic Group LLC, predicted that bitcoin will hover close to $685 until the halving. Further, Vinny Lingham, an investor and entrepreneur, provided a more specific forecast, projecting prices will be range bound until after halving day.
Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.
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