According to many experts, Bitcoin’s renewed upward trajectory could quickly lead to a much-anticipated breakout over the $20,000 line.
Matthew Dibb, COO at Stack Funds, said that, “We have witnessed a large move up over the weekend, with MicroStrategy’s efforts to increase bitcoin (BTC, 0.00%) holdings from several large players bringing with it fresh optimism,” he continued to emphasize that, “Our belief is that we will see a breach of $20,000 in the coming weeks.”
Financial analytics company MicroStrategy raised $650 million on Friday to finance bitcoin acquisitions in a convertible senior note offering. Since then, according to CoinDesk 20 numbers, the cryptocurrency has rallied by over $1,000 and was last seen trading around $19,100.
In the last few months, several publicly listed firms, including insurance provider MassMutual, have made forays into bitcoin, strengthening its appeal as “digital gold” and helping to spark a significant price rally. In the 12 weeks to Dec. 1, the cryptocurrency nearly doubled from $10,000 to a fresh record peak of $19,920 until slipping last week to $17,700 in the middle of a bout of profit-taking.
Pullbacks are a natural part of the bull markets, and for a more significant climb, they also refresh the engines. Also, as reported by Delphi Digital, the blockchain appears to be following recent bull market developments. The fall seen after the all-time high on Dec. 1 is reminiscent of the 20 percent pullback seen in February 2017 after a corresponding jump to a then-peak price of $1,200. The fall was short-lived, and in December 2017, the cryptocurrency went on to chart a meteoric rally to $19,783.
Jehan Chu, CEO of Kenetic Money, also envisages Bitcoin marching ahead with two steps forward, one step back” market activity. “Those who missed the $17,600 dip may get another chance to buy, but likely at higher levels as bitcoin pierces the $20,000 ceiling,” Chu continued.
However, after the new year, the breakout may remain elusive, as some buyers are already looking at selling near record highs. Patrick Heusser, head of trading at Zurich-based Crypto Broker AG, said that “The topside is still kept with lots of selling orders, possibly from miners,”
Earlier this month, Bitcoin failed to sustain gains above $19,000 mainly because long-term investors liquidated assets in fear of near-term sell-offs.
Institutional demand, which weakens output, could also decrease by the end of the year. “Don’t forget the Grayscale market is closed over Christmas … so no buying from institutions,” Heusser said (Grayscale is a manager of digital assets owned by the Digital Currency Group).
The Mt. Gox Risk
In February 2014, after reporting a fund deficit of 850,000 BTC in long-term attacks, the Japanese exchange Mt. Gox ceased operations. The deadline is Dec. 15 for a program to distribute about 150,000 bitcoins back to investors.
Any analysts fear that the funds’ beneficiaries would cash in the 2,500 percent return accumulated over the 6.5 years that the cryptocurrency has been locked up if the withdrawals begin prematurely, potentially leading to downward pressure on the price the cryptocurrency.
The deadline has been postponed several times and could be pushed again, according to Stack’s Dibb. He is quoted saying, “However, if there is a decision, it will likely have an immediate and negative effect on the market.” Moreso, “We are currently warning investors to brace for volatility ahead of the announcement.” He continued.
Chu of Kenetic Capital doesn’t think the Mt. Gox bitcoin is a big challenge to the market. He is quoted saying, “The impending distribution could be worth as much as $2.8 billion at the current market price. That is just 10% of the daily volume.”
So price declines, if any, may be short-lived, especially as the likes of JPMorgan expect the mass acceptance of bitcoin to gather momentum next year.
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