The bitcoin price has rebounded to $7,050 as the cryptocurrency market has recorded a gain of $13 billion. Ethereum, Ripple, Bitcoin Cash, Litecoin, and other major cryptocurrencies have also recorded a daily increase in value.
The cryptocurrency market is going through a bear cycle, and speculators who previously sought for 10 to 100-fold returns within a three to six-month period have left the market. In countries like South Korea, celebrities who were actively trading bitcoin a few months ago have offered public apology, distorting the image of bitcoin and the rest of the cryptocurrency market.
Speculators tend to over exaggerate their response when the market goes up or down, out of FOMO (fear of missing out) or panic, which is one of the primary reasons why the cryptocurrency market tends to see extreme volatility on both upside and downward movements.
Over the past three months, since the correction has begun in January, the downward movement in the cryptocurrency market has been exaggerated. Massive sell volumes were demonstrated and the market recorded a correction of around 72 percent. The recent correction has been the third worst correction in the history of the market.
But, the exact same trend was seen many times before, and each time the market had corrected itself, it recovered. In 2014, that recovery period took around a year. During this correction, after reaching its bottom at exactly $6,000, bitcoin price has been volatile in the $7,000 to $8,000 range, sometimes dipping below $7,000 and moving above $8,000.
Evidently, investors have been uncertain about the short-term trend of bitcoin and other cryptocurrencies. In a period like this, fundamentals are important and cryptocurrency adoption is particularly crucial.
In South Korea and Japan, despite the negative image of bitcoin and the cryptocurrency market, the adoption rate of digital currencies is on the rise. Japan’s largest electronics retailer Bic Camera has been accepting bitcoin for many months, the country’s largest budget airline and hotel chain Capsule are integrating bitcoin, and South Korea’s third biggest e-commerce platform is integrating 12 cryptocurrencies.
Based on transaction volume, trading volume, and search engine interests, the cryptocurrency market is undoubtedly experiencing a bear cycle, and it could take a few months before major cryptocurrencies like bitcoin can recover to its previous levels.
Still, several analysts remain positive on the mid-term trend of bitcoin. Nick Cote, a cryptocurrency trader, stated that bitcoin could test the $7,700 level in the upcoming days, and if it sustain its momentum, it could move back to the $8,000 region.
Currently, most cryptocurrencies in the market are moving in a correlated manner, and the vast majority of assets are following the price trend of bitcoin. Unified price movements of cryptocurrencies signals an unstable and immature market, and until cryptocurrencies begin to move in different directions, it seems as if the market would continue to remain unstable and highly volatile.
Featured image from Shutterstock.
Last modified: May 20, 2020 8:56 PM UTC