Within nine minutes, the Bitcoin price surged from $3,625 to $3,900, by 7.5 percent. Other crypto assets like Ethereum (ETH)…
Although Bitcoin and the rest of the crypto market only recovered to Thursday levels, the unforeseen turnaround of the short-term trend of crypto assets led traders to regain confidence in the market.
In the grand scheme of things, the increase in the Bitcoin price from mid-$3,000 to $4,000 will realistically have little to no impact on the short-term trend of the dominant cryptocurrency. But, in a period of uncertainty and doubt, minor rallies can ignite the declining confidence of investors.
Many analysts have said throughout the past week that until Bitcoin breaks out of major resistance levels in the $5,000 to $6,000 range, a mid-term trend reversal cannot be confirmed.
Mark Dow, a trader who shorted Bitcoin from its all-time high at $19,500 all the way down to $3,500, went as far to say that the inability of the asset to recover beyond $6,000 could result in a further drop of BTC below $3,120, its yearly low.
Wild volatility in a low price range is expected until the cryptocurrency establishes a strong bottom and undergoes gradual recovery throughout the months to come.
But, the abrupt recovery from low levels below the $4,000 mark suggests that investors generally consider the $3,000 to $3,500 range to be the bottom of the asset and are placing big buy walls around $3,500 to accumulate the asset.
The investor said on December 13:
10% down from here ($3,300), buy walls on @Coinbase are now the largest (in BTC notional ) since mid-2015. Similar for Bitstamp. To break lower will require filling these fiat-backed bids. Either 1) more BTC borrow to come online 2) KYC-able off-ramp selling. Derivatives selling will just lead to funding becoming very negative as it has been.
The buy wall at $3,300 prevented the asset from falling to its yearly low once again, setting up a strong support level in the low range of the $3,000 region.
The possibility of Bitcoin establishing a new yearly low certainly exists, and some analysts have suggested a potential drop of the asset to $2,000.
But, in the short-term, a high volatility rate in the range of $3,500 to $4,500 is expected, as long as the asset does not break out of resistance levels in the high $5,000 region, which could result in a proper trend reversal.
Currently, the volume of the cryptocurrency market remains relatively low, which may prevent a promising rally above $5,000 for Bitcoin. The volume of the crypto market is hovering at around $15 billion, down $5 billion from mid-December.
Featured Image from Shutterstock. Price Charts from TradingView.
Last modified (UTC): December 28, 2018 5:00 PM