At the time of writing, the price of Bitcoin (BTC) was sitting at around the $6,510 mark and has jumped approximately 14% after finding support at the six-monthly low level of $5,790. While we did expect a bounce from this support zone, buyers should beware the bull trap. In our view, this is not the end of the bear market, and traders and investors should expect possible further downside to come over the medium-to-long term.
We believe we are well and truly in the capitulation phase and that the situation is particularly dire, especially when looking at trading volume levels which are practically non-existent. Daily Bitcoin trading volumes are down over 66% from the all-time highs of December 2017. They are currently sitting at approximately $4.3 billion, down from $14 billion.
We are now witnessing a significant amount of market chop, most likely caused by high-frequency trading bots preying on the lack of volatility and slow grind down over the long term.
On a more bullish note, in the near term, Bitcoin is showing some signs of strength with buy-side volume slowly increasing. We do have our eyes set on the $6,870 level which we are making a slow creep towards. Any close above that price followed by continued upward momentum would be an undeniably bullish sign, but again, we are still bearish overall and the $7,000 resistance zone will be tough to crack.
We’re not sure what is causing this current Bitcoin price resurgence (there very well may not be a reason), but it does more or less coincide with the launch of Coinbase Custody. The arrival of custodial services from one of the industry’s most reputable companies is an overwhelmingly positive piece of news.
Coinbase Custody product lead Sam McIngvale stated in a blog post that the company will be on-boarding a range of world-class clients over the coming weeks which include exchanges, cryptocurrency hedge funds and ICO teams.
It is a popular and widely-held view throughout the cryptocurrency community that the arrival of institutional money will send the price rocketing. In our view, this line of thought has merit. There is an enormous sum of money tied up in pension funds, and providing the framework for these institutions to gain direct exposure to the crypto asset class would legitimize the space.
Coinbase was recently granted a license by the SEC to become a registered broker-dealer through its acquisition of Keystone Capital Corporation. Big things are happening behind the scenes, which is exciting, but it is important to remember that as more cryptocurrency hedge funds and actively-managed funds enter the space, it will become increasingly competitive, less volatile, and more liquid.
Bitcoin charts by TradingView.