There has been much discussion recently about the possibility of a new Bitcoin bull market that will surpass the gains achieved in late 2017. Some analysts, however, are advising caution. There is a genuine possibility that a crypto bear market and the crypto winter will continue. Before you decide to invest in the anticipation of a large return, here are some things to consider.
Strong Bitcoin Gains Drive Sentiment
We’ll be the first to admit that the recent uptick in the value of Bitcoin looks promising. The cryptocurrency surged in the middle of 2019 to break a critical $10K resistance level. At the time of this writing Bitcoin has recovered almost 40% of the gains that were lost when the token plummeted back to earth in 2018.
Accompanying these remarkable gains are bullish setups on weekly charts that some analysts point to as evidence that the Bitcoin bear market is over. In this first and second quarter of 2019 alone Bitcoin rallied 130%. These types of signals drive strong investor sentiment, but as those who invest in asset classes know this can often lead to false readings.
It would be unwise to rule out a correction to the recent gains that Bitcoin has achieved. This is referred to as bull exhaustion, and it could bring the cryptocurrency back to a new low. As such, investors are advised to consider that the crypto bear market could continue for the present time.
A Move Below $7,500
Those who invest in cryptocurrency know how volatile the market can be. The intraday swings can amount to hundred of dollars. Indeed, since Bitcoin has broken the $10K level it has retraced to $9K levels. Those who keep an eye on the markets are watching for a price retraction to $7,500 to indicate that the Bitcoin bear market will continue.
There are even some who think that Bitcoin has never seen a true bear market since it was introduced. They cite a Bitcoin low in 2018 of $3,100 as evidence that the cryptocurrency has always been in a bull market, showing steady gains year after year. If this opinion is accurate, a genuine crypto bear market could push the currency to new lows for 2019.
The concern for some investors is that during 2019 Bitcoin has generally produced higher lows than in previous years. At the present time many would consider the $6,500 level a critical support beam. Some analysts like John Rager believe that a retraction below $7,500 would mean that Bitcoin cannot sustain its recent bullish gains.
Rager stated on Twitter, “Due to the amount of volume, it’s more likely price has short term relief that can last hours or days before another push down to retest support.” It is not uncommon for asset classes to test support levels multiple times before a sustained upward move can be confirmed.
The Danger for Bitcoin Investors
All would generally agree that cryptocurrency investing is fraught with risk at all times. It is very easy for investors to get caught up in the current sentiment. This drives price action, and the upward momentum can be very subjective. As such, there is a genuine danger of Bitcoin being overbought which could lead to a harsh correction.
Added to this is the reality that many Bitcoin investors held on to their crypto following the 2017 crypto bull market. They have been patiently waiting for the price to go back up, and now they have hope that at least part of the gains they were achieved in 2017 can be recovered. This could lead to a sell-off when Bitcoin breaches resistance levels. Some investors, having been bitten once, are hesitant to press their luck again. They may be inclined to sell and recoup some profits while Bitcoin is still on the upswing.
As all investors know, a sell-off could trigger another downward move. Sentiment may be driving the Bitcoin market more than some people think.
How to Determine if the Crypto Bull Market Will Continue
There are ways that cryptocurrency investors can try to anticipate market moves that would signal a Bitcoin bear market continuation. One of these is to monitor the price action if Bitcoin begins to trend downward in a possible correction. Breaching the $7,500 level would be a bad sign. A drop below this could mean that investors have not yet seen the bottom for Bitcoin.
Speculation has always been a challenge for cryptocurrency investors. This will surely continue as volatile market movements confuse the sentiment that surrounds cryptocurrency.