Cryptos roar back: dead-cat bounce, or more upside? – Cryptocurrency News
April 3, 2019 3:26 pm
After a long period of declines, cryptocurrency prices suddenly jumped this week, with the original digital currency – Bitcoin – leading the charge higher. Yet, nobody can pinpoint a concrete fundamental reason for this change in fortune for digital coins, other than a massive buy order being executed. Hence, nothing much seems to have changed in the bigger picture, implying that this is unlikely to be the beginning of a new uptrend for cryptos, and that investors should tread lightly.
Is Bitcoin back? That is the sense one could get just by looking at recent price action and media headlines. Bitcoin prices surged by more than 20% so far this week to touch $5000, in a move reminiscent of the old ‘euphoria’ from a couple of years ago, when the digital currency frequently recorded similar gains. As is usually the case, the advance in Bitcoin also spilled over into the broader crypto market, catapulting smaller ‘altcoins’ higher alongside it.
So, what was behind this spike? In truth, that isn’t clear, though media reports suggest the trigger may have been a large buy order – estimated at $100 million. Secondary reasons possibly include technical factors, such as several investors covering or unwinding their prior short positions once Bitcoin prices started to rise above previous resistance levels, like the $4200 zone, thereby exacerbating the upside pressure.
More importantly, is this a game changer for the crypto universe? In short: probably not. Mostly because nothing has really changed in the bigger picture. Big institutional players are still shying away from the market, as regulatory and security issues haven’t been properly ironed out yet. Meanwhile, US regulators haven’t approved a Bitcoin-linked ETF, which would help legitimize the digital asset and enhance liquidity, nor have they shown clear signs they are warming up to that concept. Separately, in a sign that investor interest is gradually waning, the exchange that offered the first Bitcoin futures contracts back in 2017 – the CBOE – recently announced it will cancel that product.
In other words, this doesn’t seem like the beginning of a fresh, healthy uptrend for the crypto market – the necessary catalysts aren’t there yet. Setting aside the excitement that big price jumps often generate, until one of the above factors changes (i.e. regulation improves, US authorities approve a Bitcoin ETF, or something else changes drastically), one shouldn’t hold their breath waiting for more cryptocurrency gains in the foreseeable future.
Generally speaking, the next dates to watch are around the middle of May. That is when the US financial watchdog, the Securities and Exchange Commission, is expected to respond to multiple requests for a Bitcoin ETF. In the (unlikely) event that any of these proposals are approved, that could spark another ‘buying frenzy’ in the crypto space, though admittedly, it’s questionable whether even that would be significant enough to lay the foundations for a sustainable uptrend.
Taking a technical look at Bitcoin, immediate resistance to advances may be found near $5,200, an area marked by the November 15 low. An upside break could open the door for a test of the $6,000 handle.
On the flipside, a decline in prices could stall initially around the 200-day simple moving average (SMA) currently at $4,620, before the $4200 zone comes into view.
After a long period of declines, cryptocurrency prices suddenly jumped this week, with the original digital currency – Bitcoin – leading the charge higher. Yet, nobody can pinpoint a concrete fundamental reason for this change in fortune for digital coins, other than a massive buy order being executed. Hence, nothing much seems to have changed in the bigger picture, implying that this is unlikely to be the beginning of a new uptrend for cryptos, and that investors should tread lightly.
Is Bitcoin back? That is the sense one could get just by looking at recent price action and media headlines. Bitcoin prices surged by more than 20% so far this week to touch $5000, in a move reminiscent of the old ‘euphoria’ from a couple of years ago, when the digital currency frequently recorded similar gains. As is usually the case, the advance in Bitcoin also spilled over into the broader crypto market, catapulting smaller ‘altcoins’ higher alongside it.
So, what was behind this spike? In truth, that isn’t clear, though media reports suggest the trigger may have been a large buy order – estimated at $100 million. Secondary reasons possibly include technical factors, such as several investors covering or unwinding their prior short positions once Bitcoin prices started to rise above previous resistance levels, like the $4200 zone, thereby exacerbating the upside pressure.
More importantly, is this a game changer for the crypto universe? In short: probably not. Mostly because nothing has really changed in the bigger picture. Big institutional players are still shying away from the market, as regulatory and security issues haven’t been properly ironed out yet. Meanwhile, US regulators haven’t approved a Bitcoin-linked ETF, which would help legitimize the digital asset and enhance liquidity, nor have they shown clear signs they are warming up to that concept. Separately, in a sign that investor interest is gradually waning, the exchange that offered the first Bitcoin futures contracts back in 2017 – the CBOE – recently announced it will cancel that product.
In other words, this doesn’t seem like the beginning of a fresh, healthy uptrend for the crypto market – the necessary catalysts aren’t there yet. Setting aside the excitement that big price jumps often generate, until one of the above factors changes (i.e. regulation improves, US authorities approve a Bitcoin ETF, or something else changes drastically), one shouldn’t hold their breath waiting for more cryptocurrency gains in the foreseeable future.
Generally speaking, the next dates to watch are around the middle of May. That is when the US financial watchdog, the Securities and Exchange Commission, is expected to respond to multiple requests for a Bitcoin ETF. In the (unlikely) event that any of these proposals are approved, that could spark another ‘buying frenzy’ in the crypto space, though admittedly, it’s questionable whether even that would be significant enough to lay the foundations for a sustainable uptrend.
Taking a technical look at Bitcoin, immediate resistance to advances may be found near $5,200, an area marked by the November 15 low. An upside break could open the door for a test of the $6,000 handle.
On the flipside, a decline in prices could stall initially around the 200-day simple moving average (SMA) currently at $4,620, before the $4200 zone comes into view.
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