The bitcoin price has increased by around 6.5 percent since its dip to $7,040 on May 30, stabilising in the $7,500 region. Naturally, as the bitcoin price spiked, the entire cryptocurrency market followed the dominant cryptocurrency’s upward price trend, leading both major cryptocurrencies and tokens to increase by 3 to 10 percent.
The mid-term trend of the bitcoin price still remains bearish, and it is possible that BTC dips below the $7,000 region before initiating a major bull run or a strong rally. If BTC breaks through the $7,600 mark and continues its run towards $7,800, the start of a proper mid-term bull run is likely, but if BTC fails to sustain momentum in the $7,500 region, BTC will likely move back down to the lower end of the $7,000 region and eventually to mid-$6,000.
It is essential to prevent recency bias from influencing calls on both the downside and upside. In March, prestigious UK college Warwick Business School professor of finance Daniele Bianchi stated that hype and emotion mostly drive the price patterns of 14 major cryptocurrencies including bitcoin.
“There is research showing limited similarities between Bitcoin and gold, but looking across the 14 biggest cryptocurrencies the high volatility of their price means that they can hardly be seen as a reliable savings instrument in the short-term, let alone the long or medium term,” Bianchi explained , who presented his findings from a study entitled “Cryptocurrencies as an Asset Class: An Empirical Assessment.”
BTC has been on a downward trajectory ever since it failed to test a major support level at $10,000 and unless it secures a strong support level in the short-term, it will have difficulty securing a mid-term rally throughout 2018.
Apart from the large $500 candle that was formed on May 29, bitcoin and the rest of the cryptocurrency market have not seen sufficient volume and movement on the upside to conclude that a bull market has been initiated. Within 30 minutes, the bitcoin price increased from $7,040 to $7,500 on May 29, but since then, the price has remained in the same region without making any significant movement.
From here, it is likely that BTC drops to the lower end of $7,000, tests mid-$6,000 as a mid-term support level, and prepare a gradual increase from the higher end of $6,000 to major support levels at $10,000 and $12,000.
While the mid to long-term future of bitcoin remains promising given the positive developments in the cryptocurrency sector, it is unlikely that BTC recovers from the current level to $10,000.
Most tokens experience intensified movements on both the upside and downside, depending on the performance of major cryptocurrencies such as bitcoin and Ethereum. Over the past 24 hours, tokens such as Golem, Theta, ICON, and Dragonchain have recorded gains in the 10 to 30 percent range against the US dollar.
Featured image from Shutterstock