Why Buy Bitcoin at $8,500?
After falling to $9,100, Bitcoin (BTC) has managed to pick itself up from its bootstraps, rallying to $10,800. As of the time of writing this, the rally has paused, with the cryptocurrency falling back to $10,400.
Despite this strong bounce, a Bloomberg guest recently suggested that Bitcoin may have further to fall. In a segment recorded prior to the out-of-left-field resurgence, John Kolovos, Macro Risk Advisors chief technical strategist, gave his reasoning as to why BTC may move lower in the coming days.
Kolovos notes that Bitcoin double topping in the $13,000 to $14,000 region over the past month implies that there should be a stronger pullback, as this is often a technical pattern that could signal weakness in markets if the top is not broken past convincingly.
He adds that if you look to the cryptocurrency’s previous bull cycles, the 14-day Relative Strength Index (RSI) historically read a 40, which could imply that an asset is slightly oversold, preceding moves to the upside. As it stands, this indicator still reads at around 50, which Kolovos claims is a sign that slightly more downside is in Bitcoin’s cards.
Even fundamental analysis suggests that Bitcoin is somewhat overvalued in its current state. Earlier this week, Timothy Peterson, a prominent American crypto fund manager, opined that Bitcoin’s current active account figure suggests that BTC could be somewhat inflated.
According to Peterson’s model, which takes a 30-day median (as of July 13th) of the number of active accounts on the Bitcoin blockchain, BTC currently has a fair valuation of just above $8,000.
Also, as CryptoKea pointed out in an extensive Twitter thread, history repeating would see Bitcoin fall to $7,148 to $8,700.
What to Look Forward to
While Kolovos and other analysts watching the cryptocurrency space may be bearish in the short term, most of these temporary bears seem to be long-term bulls. The Macro Risk Advisors chartist is a perfect case in point.
After laying out why he believes that Bitcoin is poised to return to at least $8,500, Kolovos remarked that BTC holding strong above its 50-week moving average and breaking out of a descending wedge in April are positive signs. In fact, he claims that through the use of “simple technical analysis”, Bitcoin reaching $20,000 is entirely logical. The Bloomberg guest didn’t divulge deadlines for his targets.
However, there are a number of commentators that have laid out theories that suggest a $20,000 or higher Bitcoin is possible in 2019. For instance, Tom Lee has noted that BTC could rally to $20,000 or even $40,000 in Q4 of this year, drawing attention to Trump’s tweet on cryptocurrency, the buzz being generated by Libra, and potentially pro-Bitcoin fiscal policies enlisted by central banks.
Photo by Aleksi Räisä on Unsplash
