Bitcoin investors have been waiting a long time for the Bitcoin bull market to end. After the massive gains of 2017 were all but erased in the year that followed, 2019 showed promise as Bitcoin once again surged past $10,000. Then, as quickly as it began, the Bitcoin rally appeared to end. There was no October surprise, leaving investors to wonder what killed the Bitcoin rally in 2019?
Bitcoin Excitement was Premature
There was a moment in the summer of 2019 that Bitcoin seemed poised to finally break out of its holding pattern and move upwards to the goal of $20,000. Investors started to buy and the price continued to rise until Bitcoin’s value stalled around $12,000. It remained there for a short period of time before falling back below $10,000.
There was volatility that would see Bitcoin rise and fall above the $10,000 threshold on a daily basis. When there is sharp volatility in a market this points to uncertainty. The fact that investors were expressing their own uncertainty was an indication that the excitement over Bitcoin’s rally was premature.
It was only natural that those who had invested in Bitcoin would be excited about its return. Investors had been waiting a long time for the rally to begin. But that premature excitement perhaps caused Bitcoin to be overbought, and that will always send a market back down. In short, it was too much too soon for the Bitcoin market to sustain a rally.
Technical Analysis Offered a Warning
Those who study technical charts of Bitcoin and other cryptocurrencies were approaching the 2019 rally with some caution and guarded optimism. Some analysts saw the potential for a sustained rally while others saw a return to levels below $10,000.
A trick of technical analysis with Bitcoin is that the markets are just now getting ten years of data. Cryptocurrency is still a very young market compared to other asset classes. As any stock market analyst will tell you, technical indicators become more accurate over time. Looking at larger samples of time is going to produce a more accurate picture of where an asset class may be headed.
With Bitcoin there were some definite signs that the market was experiencing a temporary uptick before a correction. That can happen with all stocks and commodities.
What About Cryptocurrency News?
It is always possible that cryptocurrency news and developments could have killed the Bitcoin rally in 2019. At the top of the news was the revelation that Facebook was indeed pursuing its own cryptocurrency project. Libra was splashed on the headlines in 2019 and the US government even got involved by announcing it would hold hearings on the new cryptocurrency.
The initial response of Bitcoin to the news of Libra was not bad. The news had little overall effect on Bitcoin’s value. The true impact that it may have is something that may not be felt until 2020 after Libra’s release.
There was also news from China which indicated that China would be developing its own cryptocurrency that is backed by gold. This news probably had more impact on the value of the dollar than it did on the value of Bitcoin. No one seemed to view a Chinese cryptocurrency as a challenge to Bitcoin.
What are the takeaways from this? Most would conclude that Bitcoin does a good job of weathering developments in the world of cryptocurrency. While other tokens may react to news with more volatility, Bitcoin has been around longer and is therefore more stable.
Political Unrest in the United States
Did political unrest in the United States kill the Bitcoin rally of 2019? The final months of 2019 saw President Donald Trump of the US become the third president to be impeached. There was also a sharp division in the country between its two primary political parties. On the surface this unrest could have the potential to affect the value of Bitcoin, but that was not really the case in 2019.
Bitcoin didn’t react too much to the news of impeachment. If anything the token rose in value. But the impeachment came in the final months of the year, long after it was clear that the Bitcoin rally was stalled. The unrest didn’t even really hinder the US economy that much.
What could happen in the future is that the US government will proceed with discussions of how to regulate cryptocurrencies. If this happens there may be some fallout in the cryptocurrency market which would have an effect on the value of digital tokens.
There are many factors which may have helped to kill the Bitcoin rally in 2019. Our best guess is that the sentiment regarding Bitcoin is still guarded. It will need to rise before a more sustained rally can occur.
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