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BTC Surges to Pre-COVID Levels: Can Bulls Still Go Long?

Published 05/19/2020, 02:30 AM
Updated 07/09/2023, 06:32 AM

Bitcoin has finally returned to pre-COVID levels, currently trading near $9,500 as of May 19. It has recently broken above $10,000 for the first time since mid-February. For those unfamiliar, Bitcoin halving refers to a specific event during which the block reward for miners is reduced by 50%. Starting from Monday evening, miners are receiving 6.25 BTC per generated block instead of 12.5 BTC. This will end up in greater scarcity of Bitcoin, potentially pushing prices higher. This rhetoric has been around for several weeks, but some skeptics argue that the frenzy has been already priced in. Moreover, they say that the market has matured and is acting differently today.

Considering the current maturity level, does Bitcoin have more room for growth? The fear of missing out is pushing many investors to open long positions even though the oscillators point to overbought levels.

While most analysts agree that there is certainly much room for growth, it doesn’t mean that the Bitcoin price is heading towards the all-time highs in the immediate future. Indeed, the greatest portion of halving-related enthusiasm has already been priced in, and a medium-term correction or some sideways channel might be the most plausible outlook at least for a while.

The scarcity of Bitcoin will not be felt right away, considering that the crypto-related derivatives market is much more important today compared to the previous two halving events. Garrick Hileman, head of research at wallet provider Blockchain.com told Forbes that Bitcoin derivatives, like futures and options, encourage a more advanced price discovery and enables investors to go short much easier. Thus, it’s not only about supply and demand factors – there’s much more speculation going on. The Bitcoin price can go either direction in the short-term.

The only way to benefit from the upcoming increase in scarcity is to buy Bitcoin and hold it. So-called hodlers will likely be big winners in the end. Those who rely on the stock-to-flow model predict that the price will exceed the crazy $100,000 mark within the next few years. Besides the scarcity of Bitcoin, they point to the Fed’s unlimited quantitative easing programme that resulted in massive amounts of newly printed cash. Fed’s balance sheet has recently hit a new record at over $6.70 trillion.

On the other side, traders who like to profit from the short-term volatility will find it difficult to read the halving-related signals. Considering the high psychological pressure, some form of automated trading would make sense right now. For example, the asset manager Catalysts offers a Bitcoin bot whose algorithm help investors buy Bitcoin when the rate drops and sell it on an uptrend. Algorithms like these are slashing the emotional factors. Catalysts also provide trust-managed cryptocurrency trading strategies that enable investors to secure annual returns without actively trading. Catalyst CEO said that “only 5% of blockchain’s potential is used today. 95% of the technology’s possibilities are yet to show up in the future years”. Thus, there is much room for growth.

As for Bitcoin, it doesn’t show any correlation to traditional assets at the moment, which makes it difficult to trade even by leveraging the most complex trading bots.

All in all, there is definitely room for growth even after Bitcoin breaks above $10,000 again. However, the challenging part is to accurately predict whether the rally will extend its gains in the coming days or we should be ready for a massive correction that may last for weeks or months. The cryptocurrency market is still a wild place for active traders.

Latest comments

What is Catalysts? Who is the CEO? Why is that company relevant when they just registered in NZ three months ago?
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