Bitcoin still breathing – 2-day rally crosses $3,500 threshold

  • By Tom Cleveland

  • January 8, 2019
  • 2:21 am BST

It is time to rake Bitcoin off life support. Amazingly enough, the premier token of the crypto world just experienced a 2-day rally and poked its head above the $3,500 support level. Many analysts have suggested that $3,500 is a crucial test of support for Bitcoin and cryptocurrencies in general. There are no valuation models that peg this figure as significant, but the support level has been the topic of several technical analysts that believe this figure holds more than just a psychological impact.

Today was actually noteworthy for another reason. It was one year ago that Bitcoin peaked above $19,800 before retreating for all of 2018. But things have changed. Equities have nosedived 9%, while Bitcoin rose 11% over the past two trading days. After losing over 80% of its value from last year’s zenith, it is time to pause for reflection.

Mati Greenspan, senior market analyst at eToro, remarked: “As a relatively new concept, cryptoassets are still finding their feet in terms of value. It’s important to remember that all assets, in every market, experience a process of price discovery, and that cryptos are no different.”

The simple truth is that there is no reference point, valuation model, or historical record that can be used to explain the fluctuations of Bitcoin token values on existing crypto exchanges. We do know that supply is tightly controlled and, with only a little hype in the press, crypto values can soar. Sounds a bit like price manipulation, one of the major concerns of the SEC related to the digital currency world, but volatility is such a prominent factor in this arena that manipulation arguments would be a tough call to make in any court of law.

And then there is also the fact that Bitcoin was trading for only a few cents on the Dollar several years back, but soared in 2018 to the $19,800 mark or thereabouts (remember that there is no central trading floor – posted prices are amalgamations). The return in 2017 alone was a staggering 1,300%. Not bad for a non-fiat currency.

There have been a number of recent articles from crypto critics touting the demise of Bitcoin and its altcoin brethren. There have also been a number of research reports produced by leading global consulting firms that claim just the opposite. Cryptocurrencies have their place in the new and innovative FinTech world. Mati Greenspan also agrees: “Since its inception 10 years ago, Bitcoin has already experienced four retracements, similar to what we’ve seen in the past year. Bitcoin will find its natural centre of gravity, it’s just a matter of time.”

Has Bitcoin finally found a bottom? Is there more blood to let flow? Is this modest bump nothing more than a proverbial “Santa Rally” before yearend? There are no real answers to these questions, unless someone is willing to accept opinions and guesstimates as truth. Cryptocurrencies do have a reason for being. The coin systems themselves are valued at over $100 billion, roughly the same value for IBM. Yes, there will be a rough consolidation to come. It happens in every industry that goes through an extreme spike in growth over so short a period of time. Cryptos are no different. Survival of the fittest will prevail.