With the bitcoin price continuing to hover around $3,500 following last week’s sell-off, technical analysts have begun fevered debates about whether the flagship cryptocurrency will see more losses ahead. Crypto brokerage firm BitOoda believes that a further decline is likely but maintains that this will strengthen — not weaken — bitcoin over the long term.
Writing in a daily note to clients, BitOoda Executive Vice President Brian Donovan said that bitcoin is mimicking the trajectory of the 2011 silver bubble, which saw the precious metal’s spot price explode to nearly $50 and then crash soon after. Today, silver is trading at $15.59, nearly 70 percent below its April 2011 high.
BitOoda had been tracking similarities in the 2011 silver bubble and bitcoin’s recent price movements since early December, predicting at the time that bitcoin would likely break toward interim lows of around $3,200 within one to three months. That thesis was borne out, with BTC/USD plunging to a yearly low of $3,128 less than two weeks later.
The firm continues to believe that silver’s 2011 boom and bust provides hints about bitcoin’s mid-term prospects. Unfortunately for bulls, that means a stormy forecast that could see the flagship cryptocurrency drop as low as $2,400 before reestablishing its footing.
We believe this thesis still remains intact which could mean seeing a break of the lows in the coming weeks. A 25% selloff in BTC from the current lows of $3,200 would be to roughly $2,400.
Notably, though, BitOoda believes that this next sell-off could be just what the cryptocurrency market needs to finally break the backs of the bears. With the bitcoin price sitting below $2,500, institutional investors who missed on the historic 2017 run-up might finally feel comfortable gambling on the asset class.
“If this [drop to ~$2,400] occurs, we believe new institutional players will enter this space to start reallocating their assets and resources into Cryptocurrencies, “Donovan concluded. “Since BTC has first-mover advantage and name recognition, we think this would be the coin that ‘Wall Street’ uses as an avenue to invest in to get digital asset exposure.”
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