Earlier today, on October 5, the cryptocurrency market and the majority of leading cryptocurrencies including bitcoin, Ethereum, and Litecoin endured a major correction, declining by over 4 percent in value. Particularly, the bitcoin price underperformed relative to other cryptocurrencies, dropping from $4,450 to $4,250 within the past three days.
On October 4, the bitcoin price sustained stability at the $4,250 margin, with upward momentum created by the authorization of Japanese cryptocurrency and bitcoin trading platforms. But, uncertainty surrounding the November SegWit2x hard fork has prevented the price of bitcoin from entering the $4,300 region, leading the bitcoin price back to $4,160.
$4,450 to $4,160 in Three Days: Factors and Indicators of Recovery
The bitcoin price has struggle to recover beyond $4,600 since early September. After plunging to $3,090 subsequent to the imposition of a nationwide ban on cryptocurrency trading platforms by the Chinese government, the bitcoin price has remained in the $4,200 region.
But, it can also be said that investors and traders are less confident in the ability of bitcoin to achieve new highs in the short-term due to the uncertainty surrounding SegWit2x and China. While the global cryptocurrency exchange market has restructured in a relatively short period of time and rendered the Chinese exchange market irrelevant within a span of 30 days, China was still a highly potent market for bitcoin.
The closure of the services of Chinese exchanges coincided with the proposal of the SegWit2x hard fork proposal in November, which will inevitably lead to a split chain once again if it occurs. The fundamental difference between the SegWit2x hard fork and previous forks such as Bitcoin Cash is that SegWit2s actually has small chance of evolving into the majority chain due to the support from bitcoin businesses and miners.
In the past few weeks, the support from busnesses towards SegWit2x has declined significantly, primarily because of the rejection of the proposal from the community. Still, major mining pools and companies are opting to carry out the hard fork.
An important factor for the short-term performance of bitcoin to actively look out for is the high probability of the Chinese government resuming cryptocurrency trading in the upcoming weeks. Earlier this week, Xinhua, a state-owned news publication, revealed that the Chinese government intends to enable strict Anti-Money Laundering (AML) policies to prevent criminal activities around cryptocurrencies such as bitcoin.
For the Chinese government to establish necessary Know Your Customer (KYC) and AML systems, it must bring back trading volumes from over-the-counter (OTC) markets to regulated cryptocurrency exchanges which local authorities can oversee and control.
Positive Indicators of Price Surge
So far, short-term momentum indicators such as moving average convergence divergence (MACD) demonstrate that bitcoin will likely increase in value in the short-term. More to that, positive developments in terms of scalability, adoption, and regulatory frameworks in major regions such as the US, Japan, South Korea, and China will serve as driving factors for the short and mid-term price development of bitcoin.
If more users and businesses continue to reject the SegWit2x proposal and the market sees lower probability of the proposal being forked in the next two months, the bitcoin price could surge in the upcoming weeks.
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Last modified: March 4, 2021 5:00 PM