Can Bitcoin Find Legitimization in the Market
One of the biggest problems that bitcoin has faced is the extreme volatility based on the fact that speculation plays a large role. Another part of this is the lack of liquidity which contributes to the huge volatility.
Cendric Jeanson, CEO of BitSpread stated that “the high volatility I think is due to the low liquidity we have on exchanges today.”
Bitcoin has faced a lot of criticism during the past few weeks including large names in the industry such as JPMorgan’s Jamie Dimon as well as Birdgewater Associates founder, Ray Dalio. One of the most common criticisms for the coin is that it is way too volatile to be not only an effective investment, but one that will hold its value enough to be a valid savings.
The currency is currently trading at $3,883.76 per coin which is slightly less than the high it was at of nearly $5,000 earlier this month. To date however, the coin has risen by a staggering 289%, which is according to CoinDesk. This September, the coin dropped to a staggering low of $2,989 which represents a 40% drop in a period of less than two weeks. Thus, the volatility is shown.
Jeanson suggested that if there are more involved in the market, such as his company, it could help the underlying problem of liquidity.
Jeanson further stated that “the important thing is to add market makers on thee exchanges and have the appropriate rules, (such as) anti-money laundering and Know Your Customer, around those exchanges.”
The problem of liquidity has been the reason that some investors have decided to stay away from the market. Data from the popular company Morningstar, has shown that out of 10,000 mutual funds within the U.S., only four have bitcoin in their portfolio. If more companies can get involved, the issue of liquidity may be lessened or dropped altogether.
How Bitcoin Could Be Fading After it’s Price Rebound
After coming back from a recent low of $2,980 earlier in September, the coin is again trading lower than $4,000 which raises doubts on whether or not it can continue rising.
Week-on-week, BTC is up around 19% but on a monthly amount, BTC is down 3.7%.
The assumptions are that China’s recent hardline regarding crypto trading will not have a long-term affect given the price after all news had calmed down. The bullish exhaustion is represented air around $4,000 and a lack of substance in the rally is around $2,980.
This is the opposite of the knee-jerk sell-off during bitcoin earlier in the week after China cracked down on cryptocurrency trading. the market began to see gains directly after this.
As of September 15th, bitcoin came back from its low regarding the 100-day moving average, and became oversold in regard to its relative strength index.
There was similar price action during the month of July which saw the coin reach a sagging level of $5,000 but September seems like an unlikely time for the coin to repeat its July levels.
The chart over the past two months shows that there is a descending broadening wedge forming which shows a sort of megaphone shaped pattern. The hopes are that it will breakout of this pattern and begin to move upward.
In the case of bitcoin, the odds of it breaking gout of this trend look slightly week because of the lack of liquidity and the lack of buying as a whole. The indicator ATR shows volatility and the degree of interest or disinterest in a move but a bullish reversal in the ATR shows that there is currently strong buying pressure. This may eventually lead to a reversal. The reversal from $2,908 has been next to the drop in ATR which shows that there may be a lack of enthusiasm to make the move happen.