Bitcoin’s spectacular recovery seemed to momentarily cap two weeks ago, when the cryptocurrency briefly touched the $8,000 level before dropping off to just above $7,000. Since then, the top crypto continued its surge and now appears to aim for the $9,000 level, having most recently clocked in at $8,785, the highest in a year.
While this has understandably excited many investors, others are warning that the amount of momentum signals a correction in the near-term. According to Weiss Ratings, however, the correction will represent the best buying opportunity for investors since 2015, reports Bitcoinist.
Juan Villaverde, the chief crypto analyst at the agency, explained why Bitcoin is mirroring the exact price action that occurred in 2012 and 2015, albeit with much greater stakes. In January 2012, Bitcoin went from a bottom of $2 to a high of $7, only to suffer a 45% correction that sent it back to $4 per unit. This correction acted as a launching pad for a massive bull run that reinvented the asset’s price, bringing it to four-digit territory. By December 2013, Bitcoin was trading at nearly $1,200.
Virtually the same thing happened three years later. After a steady rise to $500 by November 2015, Bitcoin again corrected by around 40%, with the sell-off bringing the price back to $300 within a week. As Villaverde notes, this was the catalyst for another price re-evaluation that culminated in an extensive bull run that brought Bitcoin just shy of $20,000 in December 2017.
Villaverde is reasonably certain that we are witnessing the third such occurrence, and that, like in the previous instances, the correction will lead to another rally for the ages. In an analysis published by CoinDesk on May 24, Omkar Godbole questioned whether Bitcoin can surpass the $8,300 level in the coming days and weeks. Although the token has since blazed past this level, Godbole nonetheless echoes Villaverde’s view that a correction is likely coming based on technical data.
And while the charts tell Godbole that a pullback is imminent, they also indicate an overwhelmingly positive development. As Godbole notes, Bitcoin’s 200-day moving average has turned bullish for the first time since May 2018. This is just one of many technical indicators that suggest the crypto market is headed towards a long-term shift from bearish to bullish.
In his own analysis, Villaverde conceded that Bitcoin’s improved infrastructure has added elements to the market that were absent during the price action of 2012 and 2015. Despite new factors coming into play, both Villaverde and Godbole concur that the next major dip in Bitcoin’s price will act as a flashing buy signal before the market goes on yet another prolonged bull run.
Do you think a short-term correction is in the cards for Bitcoin before the next surge? Let us know below.
