Bitcoin reached a maximum of around US $13,871 after 17 months during the session on Wednesday, June 16th, 2019, but that price rapidly receded to US $10,700 by more than 16%. This indicates that the moves of Bitcoin and other cryptocurrencies are usually quite erratic and high volatility. Economic analysts say that it is not uncommon for Bitcoin to increase its volatility significantly after new information has entered the market.
Recent Bitcoin’s rise was mainly supported by Facebook’s announcement about the launch of Libra. It was informed that this new cryptocurrency will operate on the same Blockchain platform as Bitcoin, which will increase the confidence in this technology. Some world-renowned companies such as MasterCard, Visa, Uber and PayPal are said to expect Facebook’s Libra to become a global payment system.
With the support of these companies, it is said that Facebook’s Libra is likely to be widely accepted as a means of payment. It is considered that Bitcoin is making profits because confidence in the virtual currency sector has increased. Before the news of Facebook was released, Bitcoin had already been recovering due to new demand for cryptocurrencies that had arisen.
It has been speculated that when the largest companies issue their own cryptocurrencies, Bitcoin can be used as the reference cryptocurrency, in the same way as the dollar is used as a reference to calculate the exchange rate among other currencies. That is why the news of Facebook and the possibility that more companies will do the same has supported Bitcoin’s bullish price trend.
Bullish Momentum Ends
Normally, when an asset’s price rises or falls rapidly, it also recedes in the opposite direction, which most of the time is caused by profit taking, even if it is a short-term or long-term sale. It is also said that an asset is over-extended when it has risen or fallen too much without a correction. Under these premises, it could be said that Bitcoin’s bullish price is over-extended and possibly close to a correction.
On the weekly Bitcoin chart, a long upper shadow candlestick pattern can be observed, which indicates high volatility, according to experts. As the actual body of the candlestick is relatively small, that means that the asset is very indecisive. Experts explain that there is the possibility that Bitcoin’s price of US $10,000 will acts as a support, but it could lead it to a bearish price. Upwards, it is noted that the peak at US $13,871 could act as a resistance.
Extension of Bitcoin’s Bullish Price
Analysts have said that since Bitcoin’s price reached its historic maximum around US $20,000, this cryptocurrency has been over-extended to bullish prices and into a bubble that is about to explode. Even though, an abrupt fall of Bitcoin’s price was observed, it has been able to recover recently. However, this recovery has occurred so fast that it has led it again to over-extend to bullish prices. Since early this year, Bitcoin has risen 270%, while in comparison, the S&P (Standard & Poor’s) 500 has risen 20% in the last two years.
By Willmen Blanco