Bitcoin’s revived uptrend could soon lead to a much-anticipated breakout above the $20,000 mark, according to several analysts.
“We have witnessed a large move up over the weekend, with MicroStrategy’s efforts to increase bitcoin holdings from several large players bringing with it fresh optimism,” Matthew Dibb, CEO of Stack Funds, told CoinDesk. “Our belief is that we will see a breach of $20,000 in the coming weeks.”
On Friday, business intelligence firm MicroStrategy raised $650 million through a convertible senior note sale to fund bitcoin purchases. Since then, the cryptocurrency has rallied by over $1,000 and was last seen trading near $19,100, according to CoinDesk 20 data.
Several public-listed companies, including insurance firm MassMutual, have forayed into bitcoin in the past couple of months, bolstering its appeal as “digital gold” and helping trigger a major price rally. The cryptocurrency nearly doubled from $10,000 to a new record high of $19,920 in the 12 weeks to Dec. 1, before falling to $17,700 last week amid a bout of profit taking.
Pullbacks are a normal element of bull markets and often recharge the engines for a bigger ascent. Further, the cryptocurrency looks to be following previous bull market patterns, as noted by Delphi Digital. The decline seen following the all-time high on Dec. 1 is reminiscent of the the 20% pullback seen following a similar move to a then-peak price of $1,200 in February 2017. That decline was short-lived and the cryptocurrency went on to chart a meteoric rally to $19,783 in December 2017.
Kenetic Capital’s CEO Jehan Chu also foresees bitcoin marching onward with “two steps forward, one step back” price action. “Those who missed the $17,600 dip may get another chance to buy, but likely at higher levels as bitcoin pierces the $20,000 ceiling,” Chu said.
The breakout, however, may remain elusive until the new year, as some investors are still looking to sell around record highs. “The topside is still kept with lots of selling orders, possibly from miners,” Patrick Heusser, head of trading at Zurich-based Crypto Broker AG, told CoinDesk over Twitter.
Bitcoin struggled to keep gains above $19,000 earlier this month largely due to long-term holders liquidating holdings in fear of near-term sell offs.
Institutional demand could also wane toward the year’s end, weakening demand. “Don’t forget the Grayscale market is closed over Christmas … so no buying from institutions,” Heusser said. Grayscale is a digital asset manager owned by Digital Currency Group, the parent company of CoinDesk.
Mt. Gox risk?
Japanese exchange Mt. Gox ceased operations in February 2014 after announcing a fund loss of 850,000 BTC in long-term attacks. The deadline for a plan to distribute some 150,000 bitcoin back to investors is Dec. 15.
Some observers fear that if the distributions starts soon, recipients of the funds may cash in the 2500% return accrued over the 6.5 years the cryptocurrency has been locked up, possibly adding to downward pressure on the cryptocurrency’s price.
According to Stack’s Dibb, the deadline has been extended multiple times and could be delayed again. “However, if there is a decision, it will likely have an immediate and negative effect on the market,” Dibb said. “We are currently warning investors to brace for volatility ahead of the announcement.”
Kenetic Capital’s Chu doesn’t believe the Mt. Gox bitcoin it is a huge risk for the market. “The impending distribution could be worth as much as $2.8 billion at the current market price. That is just 10% of the daily volume,” he said.
So price dips, if any, could be short lived, especially as the likes of JPMorgan expect bitcoin’s mainstream adoption to gather pace next year.