Bitcoin In Bullish Retracement?

Bitcoin has battled for the current week with wild price swings causing traders to remain alert. 


The bitcoin price is skipping around $10,000 per bitcoin as bullish investors seize the chance to purchase at under the psychologically significant level. 


A month ago, George Ball, the CEO of investment firm Sanders Morris Harris and previous CEO of Prudential Securities, said he expects there to be a flood of bitcoin purchasing "after Labor Day"— stating that he believes current worldwide markets are stuck in the "mid-year dejection," with market participants sitting tight for "a spark" which he thinks will light toward the beginning of September. 


Ball is the most recent in a developing line of prominent, established investors, fronted by the Wall St legend Paul Tudor Jones in May, who have trumpeted bitcoin as a potential hedge against inflation they see coming as a result of COVID-induced stimulus.


Bitcoin and crypto traders were scared this week by a quick sell-off in equity markets that saw the S&P 500 record its first weekly loss in almost 2 months. The Nasdaq posted its most painful weekly performance since March too.


The bitcoin cost dipped back under the key $10,000 level on Friday for the first time since July, punishing overexcited bullish bitcoin speculators.


"Bitcoin’s volatility is a key characteristic as an asset class," Paolo Ardoino, Chief Technology Officer at Hong Kong-based bitcoin and cryptocurrency exchange Bitfinex, said. 


Regardless of the value swings, many in the bitcoin and crypto industry stay bullish about bitcoin's viewpoint heading into this week, with data supporting the fact that the recent dip is a bullish retracement, setting up for further gains.


"A drop like this won't deter the majority of investors, who have a longer-term investment thesis," John Kramer, a trader at Hong Kong-based market maker GSR, said via email, adding "many investors will see this as an opportunity to buy the dip."


"Nothing has changed about the fundamentals behind the bull case," Kramer stated, highlighting central banks' continued stimulus measures, including France's $100 billion plan announced this week.


"If there is a silver lining, it is this–that a drop back down to $10,000 could very well tempt some bulls who have been sitting on the sidelines to at last invest in bitcoin," Simon Peters, a crypto-asset analyst at multi-asset investment platform eToro, said via email.


While the cryptocurrency has declined from USD 12,400 to 10,000 in the previous three weeks, the collection of "accumulation addresses" has expanded by 2% to 513,000, according to Glassnode. 


Accumulation addresses are those that have at least two receiving non-dust moves (very small amounts of bitcoin) and have never spent said funds. The measurement excludes addressing belonging to miners and exchanges and categorises wallets with no activity for the last 7 years as "lost". 


The divergence prices and accumulation addresses suggest that market participants see the value drop as a positive bull market pullback and anticipate that price should rise again.


So far, bitcoin has managed to defend the USD 10,000 support (despite slightly dipping under for an hour and returning above the support level) – a sign of an underlying bullish tone in the market.


It is not unusual to see Bitcoin retrace up to 30% and then continue its bull run. Fundamentally and technically, bitcoin’s strength is apparent. According to the experts, the price is currently shaking off the loose hands and will swing in favour of the bulls again. Bullish retracements only hurt those who leveraged up at the top and have to sell down at these lower price. It also hurts those who do not take the opportunity to scoop up some crypto at a cheaper rate.