Bitcoin bounces on signs of institutional interest, but remains rangebound – Cryptocurrency News
October 17, 2018 3:29 pm
Bitcoin staged a modest recovery earlier this week, aided by news that asset management giant Fidelity will be entering the crypto arena soon to buy, sell, and store prominent digital coins for its institutional clients. Despite the rebound though, the world’s largest cryptocurrency remains confined in a relatively narrow range, and may require signs of more widespread adoption by investors before breaking above it.
The previous week concluded with Bitcoin falling towards the lower bound of the sideways range it has been trading in over the past 1½ months, between $6000 and $6840. Although the catalyst was not clear, Bitcoin (and nearly all major coins) appear to have been dragged down by a broader sell-off in markets, most notably in stocks. To a lesser extent, a scathing testimony by renowned economist Nouriel Roubini before the US Senate Banking Committee on cryptos may have contributed a little to the drop, with the academic slamming virtual currencies.
Yet, sentiment swiftly turned around and Bitcoin opened this week on a stronger footing, aided by news that Fidelity Investments has launched a new company for its institutional clients, which will trade and store major digital coins. This was seen as a major step towards legitimizing cryptocurrencies as an asset class, perhaps to eventually serve as an alternative investment choice in a portfolio. In particular, the company’s willingness to take custody of coins on behalf of clients is a major breakthrough, as the absence of such custody has been one of the main factors holding back institutional interest thus far, alongside a lack of regulation. For perspective, Fidelity manages roughly $7.2 trillion (yes, trillion) in assets globally, so its decision to enter the crypto space likely carries substantial weight in the eyes of investors.
On another note, the latest leg higher in Bitcoin may have also drawn strength from a sell-off in the 8th largest cryptocurrency by market capitalization, Tether. This so-called “stablecoin” is presumably pegged to the US dollar, and is mostly used as a means of buying other cryptos. Following concerns around whether the company issuing it actually has enough reserves to fully back its tokens, investors started to rotate away from Tether, likely diverting some funds back into other larger coins.
Now, as for what the future holds, there is little on the horizon in terms of fundamental catalysts to suggest a major move either higher or lower is looming. For instance, the prospect of a Bitcoin exchange-traded fund (ETF) being approved by US regulators anytime soon is remote, even despite some pundits suggesting otherwise. An ETF would make it easier and safer to buy the digital coin but US officials have rejected a plethora of applications for such an instrument, consistently citing a lack of maturity in the market, an absence of regulation, and the existence of fraud and manipulation – none of which has been properly addressed yet.
That doesn’t imply that price action in Bitcoin will be dull though, as prices currently rest at a critical technical crossroads, setting the stage for a major move in case one of these barriers is breached. Specifically, Bitcoin has been trading in a very narrow range since early September, with a lower bound at $6000 and the upper at $6840. In a broader context, prices are also trading within a descending triangle formation since early March. Hence, a potential break above the upper bound of this triangle coupled with a move above $6840 could be a signal that the next major wave in prices will be to the upside, initially for a test of the $7400 area.
On the other hand, a clear close below the $6000 territory – the lower bound of the range and triangle – would be a strong sign that the broader downtrend may be back in force, as this handle successfully halted several declines in recent months. In such a case, support may be found near the $4980 mark, this being the high from September 2, 2017. Even lower, the $3600 zone may come into view, defined by the lows of August 22, 2017.
Bitcoin staged a modest recovery earlier this week, aided by news that asset management giant Fidelity will be entering the crypto arena soon to buy, sell, and store prominent digital coins for its institutional clients. Despite the rebound though, the world’s largest cryptocurrency remains confined in a relatively narrow range, and may require signs of more widespread adoption by investors before breaking above it.
The previous week concluded with Bitcoin falling towards the lower bound of the sideways range it has been trading in over the past 1½ months, between $6000 and $6840. Although the catalyst was not clear, Bitcoin (and nearly all major coins) appear to have been dragged down by a broader sell-off in markets, most notably in stocks. To a lesser extent, a scathing testimony by renowned economist Nouriel Roubini before the US Senate Banking Committee on cryptos may have contributed a little to the drop, with the academic slamming virtual currencies.
Yet, sentiment swiftly turned around and Bitcoin opened this week on a stronger footing, aided by news that Fidelity Investments has launched a new company for its institutional clients, which will trade and store major digital coins. This was seen as a major step towards legitimizing cryptocurrencies as an asset class, perhaps to eventually serve as an alternative investment choice in a portfolio. In particular, the company’s willingness to take custody of coins on behalf of clients is a major breakthrough, as the absence of such custody has been one of the main factors holding back institutional interest thus far, alongside a lack of regulation. For perspective, Fidelity manages roughly $7.2 trillion (yes, trillion) in assets globally, so its decision to enter the crypto space likely carries substantial weight in the eyes of investors.
On another note, the latest leg higher in Bitcoin may have also drawn strength from a sell-off in the 8th largest cryptocurrency by market capitalization, Tether. This so-called “stablecoin” is presumably pegged to the US dollar, and is mostly used as a means of buying other cryptos. Following concerns around whether the company issuing it actually has enough reserves to fully back its tokens, investors started to rotate away from Tether, likely diverting some funds back into other larger coins.
Now, as for what the future holds, there is little on the horizon in terms of fundamental catalysts to suggest a major move either higher or lower is looming. For instance, the prospect of a Bitcoin exchange-traded fund (ETF) being approved by US regulators anytime soon is remote, even despite some pundits suggesting otherwise. An ETF would make it easier and safer to buy the digital coin but US officials have rejected a plethora of applications for such an instrument, consistently citing a lack of maturity in the market, an absence of regulation, and the existence of fraud and manipulation – none of which has been properly addressed yet.
That doesn’t imply that price action in Bitcoin will be dull though, as prices currently rest at a critical technical crossroads, setting the stage for a major move in case one of these barriers is breached. Specifically, Bitcoin has been trading in a very narrow range since early September, with a lower bound at $6000 and the upper at $6840. In a broader context, prices are also trading within a descending triangle formation since early March. Hence, a potential break above the upper bound of this triangle coupled with a move above $6840 could be a signal that the next major wave in prices will be to the upside, initially for a test of the $7400 area.
On the other hand, a clear close below the $6000 territory – the lower bound of the range and triangle – would be a strong sign that the broader downtrend may be back in force, as this handle successfully halted several declines in recent months. In such a case, support may be found near the $4980 mark, this being the high from September 2, 2017. Even lower, the $3600 zone may come into view, defined by the lows of August 22, 2017.
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