Bitcoin, the flagship cryptocurrency, has seen its price drop in the past few months. Trend analysis suggests the cryptocurrency’s price may keep dropping, although some analysts remain bullish.
Bitcoin fell from a near $20,000 all-time high late last year, after what some believe were buyers affected by fear of missing out (FOMO) started leaving the markets. Despite a short recovery in March, the flagship cryptocurrency kept plummeting and has at press time dropped another 5.71 percent in the last 24-hour period and is trading at 6,350.
According to Bloomberg’s Janine Wolf, the Directional Movement Index is “on its strongest negative trend since the sell-off earlier this year.” Its ADX line, the news outlet adds, “is currently at 39.3,” with anything above 25 being considered a strong trend.
Moreover its DVAN trend line, ”a divergence analysis that measures buying or selling pressure,” is also pointing towards further decline. This, per Wolf, means bitcoin could test its 2018 low. As CryptoGlobe covered a trading firm president has recently noted that bitcoin’s low volatility could mean a bottom is forming. Bill Baruch, of Blue Line Futures, stated:
Today I am watching bitcoin and it’s plummeting volatility, the volatility…is at the lowest level in more than a year…this is a sign that the selling has become exhausted.
Bitcoin bull and former Wall Street trader Max Keiser has recently implied bitcoin is due for a huge price rise, as he tweeted out that “price follows hashrate,” while pointing to another tweet stating the cryptocurrency’s hashrate is now at an all-time high.
Speaking to Express Luis Carranza, founder of London Fintech Week, revealed that despite the downtrend he still believes the cryptocurrency can surge as there are reasons to remain “optimistic.” Some of these reasons, he detailed, include the amount currently being raised by initial coin offerings (ICOs) and crypto becoming a “grown-up game.” He said:
Crypto is unpredictable. There are massive spikes and drops. $4500 could be the bottom, but there is nothing preventing $2500 from being the bottom. Likewise, as crypto becomes more mainstream the price tends to rise. Even if the price drops to $1000 there's nothing preventing another surge to $14,000.
Potentially backing up Carranza’s words, analysis conducted by the co-founder of Fundstrat Global Advisors Tom Lee has shown that “historically, 10 days comprise all of the performance in any single year for bitcoin’s price.”
Per Lee’s analysis, taking out these 10 days would see bitcoin be down 25 percent a year, which presumably means hodling the cryptocurrency makes sense, as recovery from a new bottom to a new high could take only a few days.
Gavin Pannu, a Market Analyst and Trading Mentor at the London Academy of Trading (LAT) has questioned the theory that bitcoin is heading for a new bottom. He said:
Bitcoin volatility is now at its lowest level from a year ago, but a comparison of a bubble-like asset, which had a significant rise compared to the aftermath of a large correction, does not necessarily mean this is the bottom.
It’s worth noting Tom Lee has earlier this year created a “Bitcoin Misery Index” (BMI) that, back in March, signaled that it was time to buy the cryptocurrency when it was trading at $8,800. He sees bitcoin hit $25,000 by the end of this year.