Bitcoin analysis: will the coin advance to $50,000?
The price of bitcoin (BTC) has risen sharply in recent weeks after the coin briefly dipped below the $30,000 mark. The rally has included alternative cryptocurrencies, known as “altcoins” (alternatives to bitcoin), with some of these approaching their previous all-time highs reached in April and May.
What has been driving the BTC trend higher? With the price approaching the $50,000 level, will bitcoin keep going up?
In this article, we look at the recent move up and the latest price forecasts. Scroll down for a video in which David Jones, chief market strategist at Capital.com, provides an updated bitcoin price analysis and explores possible trading strategies.
Bitcoin sentiment turns bullish
Bitcoin’s latest price has broken out of its recent trading range since the April–May sell-off that brought it down sharply from the all-time high of $64,863.10 reached on 14 April. Bitcoin has gained close to 64% since it bottomed out at $29,360.96 on 20 July. It had been trading between $30,000 and $40,000 since May, bouncing up and breaching the $40,000 level earlier this month.
A significant crackdown on cryptocurrency-related financial products and mining in China turned market sentiment bearish in May, compounded by the threat of increased regulation and taxation in other areas such the US and Europe.
Even with the crash in the price, the long-term chart shows the BTC value was still in an upward trend, with the trendline around $20,000.
A short squeeze on 26 July saw close to $1bn in short positions liquidated, according to data from ByBit, as the price climbed from a low of $35,287.31 to a high of $40,499.68, rising above the $40,000 level for the first time since 16 June. Liquidations spiked again on 6 August, totalling $454.76m, the data shows, as the price climbed from a low of $39,932.18 to a high of $43,271.66.
Bullish sentiment has kept bitcoin up even as the US Congress has included new tax rules targeting cryptocurrency brokers in its infrastructure bill. The bill would require trading platforms and other brokers to report transactions of digital assets such as cryptocurrencies to the Internal Revenue Service (IRS). The provision is included in the bill as the reporting is expected to increase the amount of taxes cryptocurrency traders pay, and the funds will be used to pay for the infrastructure projects. It also seeks to address ongoing concerns among lawmakers that cryptocurrency traders have not been subject to capital gains tax in the same way investors in other financial assets have been.
While the crypto markets dipped briefly when the provisions in the bill were revealed on 28 July, they quickly resumed their rally.
What do the latest forecasts indicate about the direction of the bitcoin price? Can bitcoin reach $50,000 by the end of August?
Bitcoin analysis: can the cryptocurrency extend its rally?
Check out this video in which Capital.com’s chief market strategist David Jones uses bitcoin technical analysis to explore possible trading strategies.
Technical analysis from CoinCodex was bullish at the time of writing (16 August), with 30 indicators giving bullish signals and two offering bearish signals. The three-day out to 200-day simple (SMA) and exponential moving (EMA) averages indicated bitcoin as a buy, as did the average directional index, Hull moving average and volume-weighted average price (VWAP). But the moving average convergence divergence (MACD) and relative strength index (RSI) were neutral.
The relative strength index (RSI) went overbought on 26 July above the 80 level, but went into bearish divergence, falling below the 70 level, even as the price extended higher. That could indicate the rally is running out of steam.
However, given the large swings in cryptocurrency prices, bitcoin could pull back by several thousand dollars in short-term volatility, yet remain in an upward trend.
In a weekly report, analysts at Arcane Research said, “A significant amount of bitcoin has flowed out of exchanges over the past week, comparable to the peak outflows in November 2020. That represents a near full retracement of the significant inflow volume observed during the May sell-off.
“Generally, continued outflows from exchanges with significant deviations from the mean indicate that smart-money flows are holding rather than selling positions. As overall BTC outflows hit a six-month high, expectations remain higher as bitcoin prepares for another upside run on the hodling and accumulation trend… Moreover, transaction volumes are spiking higher, further underlining the increasing demand for BTC.”
In terms of the Congressional debate, Mati Greenspan, founder and chief executive officer of Quantum Economics, said, “The recent rally we've seen in cryptocurrencies is less about the outcome and more about the debate itself. The fact that tens of thousands of people reportedly called in to their senators to advocate crypto-friendly legislation, and many politicians are now actively arguing in favour of it, is insanely bullish.
“Where we go from here is anyone's guess. After a strong rally like this, a general pullback would not be at all surprising, but if we do manage to forge new local highs, the next resistance levels easily observable are the all-time highs formed earlier this year.”
The bitcoin price prediction from algorithm-based forecast site WalletInvestor projects the coin will reach the key $50,000 mark by the end of the week, but then fall back below an average price of $45,000 at the start of September. However, it expects the price to rebound in the coming months, reaching $56,296.40 by the end of 2021.
The site then projects bitcoin will surpass the previous all-time high to trade above $65,000 in April 2022, reaching $84,002.00 by the end of 2022 and $167,097 by the end of 2025.
The bitcoin forecast from DigitalCoin puts the price at an average of $73,455.87 in 2021, rising to $84,855.04 in 2022, $143,965.93 in 2025 and $217,869.32 by 2028. It predicts bitcoin could trade as high as $236,231.09 during that period.
The prediction from Long Forecast is more bullish, estimating the bitcoin price will reach $59,115 by the end of 2021, more than double to $160,136 by the end of 2022, and peak at $185,758 in January 2023. But it then suggests the price will slide to $74,204 in March 2025 before rebounding to $144,254 in September of that year.
It is important to keep in mind that cryptocurrency markets remain extremely volatile, making it hard to predict what the price of the coin will be in a few hours, and even harder to give long-term estimates. As such, analysts and online forecast sites can get their predictions wrong. Therefore, we recommend you always do your own research and consider the latest market trends and news, technical and fundamental analysis, and expert opinion before making any investment decisions.
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