For anyone who is even a casual follower of bitcoin it will come as no surprise to say that bitcoin has been in a bear market since its peak in December 2017.
The market has fallen from a peak of just under $20,000 (approx $19500 depending on which exchange you follow) down to a low of a little over $3000 in December of 2018 (a fall of close to 85%). The start of this year has seen the usual forecasts of where bitcoin will go over the next year and, unlike recent years, many forecasters are expecting further declines in the price of bitcoin – some targeting the $1300 region where bitcoin peaked at the previous bull market top back in 2013.
I believe that this may be overly gloomy. While a bear market of just 12 months is on the short side (the last slump took 20 months to play out) we should also consider the extent of the slump.
Using the previous bear market as a comparison the extent of this move is almost identical to the last bear market (this covered an 87% fall).
Sentiment in the market is also a positive factor. The number of people expecting bitcoin to go up in value is at an extreme low reading. Institutions are pulling back from the market and the general enthusiasm for investing in the cryptocurrency market is at an extreme low. With my contrarian hat on this bodes well for the market to be constructive over coming months.
The one area of concern that still remains is the broader macro-economic backdrop. We are entering (or more precisely have entered) a period of massive global tightening in credit conditions. In addition to raising interest rates the central banks have either started (in the case of the US) or starting (in the case of Europe and Japan) to reverse the QE bond purchase programmes that followed the 2008 financial crisis. An activity that will drain liquidity from the global system.
Still, with that one fly in the ointment I still believe that the medium term outlook is constructive and we are likely to see a rally in bitcoin at least for the next 6-12 months.
A quick look at the technicals shows a constructive base picture starting to form and a key level is seen at $4300 (Basis the Panxora.io exchange). A break above this level should see a move to at least $6000. This move could be whats needed to break the current funk that the market is enduring and see further constructive moves.
Good Luck out there.
This article is for information purposes only. Neither Digital Finance News or the author are providing this as investment or trading advice or a recommendation to purchase or sell any cryptocurrency or any security. Investors should take independent advice before making trade or investment decisions.