Bull Market Early or Bear Market Trap?
For virtual currency investors, the bigger question is whether this round of currency price increases is a bull market reset or a bear market trap.
Last night, Bitcoin experienced a skyrocketing price in just one hour. The price rose from the violence of about US$6,800 to a high of US$8,100. It rose nearly 20% during the day. Under Bitcoin’s leadership, other virtual currencies also ushered in a strong rally, with single-currency gains even exceeding 50%. Faced with the collective warming up of the virtual currency market, many investors shouted that “the bull market is back”.
According to data from the CoinMarketCap website, the market value of Bitcoin increased by almost US$20 billion in one day, and the entire virtual currency market also saw overall market growth. There was no “seeking” effect. Based on daily Bitcoin transaction volume exceeding 9 billion US dollars, there should be billions of incremental funds entering the market yesterday, rather than stock funds.
In fact, around the time of the Bitcoin boom, Bitfinex, a digital currency trading platform, also recorded a number of large buys. With the increase in the purchase of Bitcoins, many shorts were forced to close their positions, further amplifying the bullish trend of the market. For this phenomenon, Nick Kirk, chief data officer at Cypher Capital, also expressed his approval. At the same time, he also believes that this strong rally is more likely in response to the release of early regulatory pressures.
Pantera Capital Management, one of the world’s largest digital currency hedge funds, said Bitcoin has bottomed out. The 6,500 US dollar is the low point for the Bitcoin bear market. Bitcoin will be above this price for most of this year and may even break last year’s record high of $20,000.
Fundstrat founder Tom Lee also expressed confidence in Bitcoin. He believes that Bitcoin’s current P/B ratio and other indicators are almost the same as the bear market of late 2014, and has formed a major technical correction. Based on this, he claimed that the value of Bitcoin may increase more than three times this year and rose to US$25,000 at the end of this year.
Historical data shows that Bitcoin has indeed risen in the second quarter of the calendar year. In the second quarter of 2011, Bitcoin rose as much as 1,964%, up 36.25% in 2012… 61.98% in 2016, and 131% in 2017.
Of course, the OTC volume of Bitcoin is also showing signs of market recovery. Since March, Bitcoin trading volumes in Canada, Europe, Vietnam, Mexico, and Vietnam have increased and reached record levels.
With the successive admission of major financial institutions, such as hedge fund giant Soros and the Rockefeller family’s main financial group, the financial size of the virtual money market will further expand.
However, it is worth noting that even though Bitcoin is currently on a strong rise, it is still in a downtrend channel and has yet to break out effectively. It remains to be seen if the virtual currency market has really reversed. Investors should always be vigilant and pay attention to position management.
More importantly, the world’s major Bitcoin markets, including the United States, have sought to establish regulatory frameworks. Regulatory uncertainty will inevitably have a greater impact on the near-term development of the virtual currency market. In the long run, a healthy and orderly market can go even further.
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