While it appeared that Bitcoin was on track to break its previous all time high of $20,000, a sudden crash of a few thousand dollars in a matter of hours have people second-guessing. The fall in the price of Bitcoin is not too unexpected but it has painted a new path for the cryptocurrency market in the short run.
Some analysts are calling this a healthy correction and a mere blip on the way to $20,000 and above. However, there are some who believe that the rally was driven by institutions who were happy to take their profit at $19,000 — a mark that has not been seen since 2017.
This means that, like in 2017 and on to 2018, the next move may well be altcoin season brewing. This altcoin season would also be a very different one as some of the projects that rallied back then have managed to grow exponentially and have strong fundamentals.
Healthy and expected fall
Naeem Aslam, Chief Market Analyst at Avatrade, is not worried at all with the price drop.
“Worry not, this is a healthy correction. Technical indicators have been long indicating that a correction is coming and now the price is retracing towards its 50-day SMA on the daily time frame. The pace of the current sell off is good news for Bitcoin because it has pushed the RSI in an oversold zone on the 4-hour time frame which hasn’t happened since September. So overall, we strongly believe that the current sell off is a very healthy correction,” he said in an email to followers.
However: “The primary reason for the steady grind up in Bitcon has been the increased interest and aggressive buying activity from institutions,” said Nick Cote of gamified trading platform Hxro Labs. “A lot of investors are going through Grayscale.”
Rising institutional demand can be seen in heavy accumulation by Grayscale’s Bitcoin Trust, with the fund’s BTC holdings exceeding 500,000 earlier this month.
Cote also said that top American companies like Square and Microstrategy are “putting BTC on their books as a hedge against inflation and poor monetary policy management from the central banks.” He described this behavior as driving a “positive feedback loop” in the markets:
“There will be pullbacks of course, but as long as institutions believe in the narrative of Bitcoin being used as a store of value or hedge against inflation, it becomes a positive feedback loop.”
Altcoins coming in?
Bitcoin’s fundamentals are now stronger than ever before, pointing to post-halving supply dynamics, a rise in institutional adoption, and a number of “publicly listed U.S. companies moving 10% of their balance sheet into the asset,” said NEM head of trading Nicholas Pelecanos
Pelecanos is now looking to a rise in the altcoin markets, stating: “BTC is back at its all-time high levels, but what is worth noting is the valuation of the altcoins which are on average still 50% below their all-time highs.”