09.12.2019

Why Buy Bitcoin at $8,500?

Despite this strong bounce, a Bloomberg guest recently suggested that Bitcoin may have further to fall. In a segment recorded prior to the out-of-left-field resurgence, John Kolovos, Macro Risk Advisors chief technical strategist, gave his reasoning as to why BTC may move lower in the coming days.

After falling to $9,100, Bitcoin (BTC) has managed to pick itself up from its bootstraps, rallying to $10,800. As of the time of writing this, the rally has paused, with the cryptocurrency falling back to $10,400.

Kolovos notes that Bitcoin double topping in the $13,000 to $14,000 region over the past month implies that there should be a stronger pullback, as this is often a technical pattern that could signal weakness in markets if the top is not broken past convincingly.

He adds that if you look to the cryptocurrency’s previous bull cycles, the 14-day Relative Strength Index (RSI) historically read a 40, which could imply that an asset is slightly oversold, preceding moves to the upside. As it stands, this indicator still reads at around 50, which Kolovos claims is a sign that slightly more downside is in Bitcoin’s cards.

Even fundamental analysis suggests that Bitcoin is somewhat overvalued in its current state. Earlier this week, Timothy Peterson, a prominent American crypto fund manager, opined that Bitcoin’s current active account figure suggests that BTC could be somewhat inflated.

According to Peterson’s model, which takes a 30-day median (as of July 13th) of the number of active accounts on the Bitcoin blockchain, BTC currently has a fair valuation of just above $8,000.

Also, as CryptoKea pointed out in an extensive Twitter thread, history repeating would see Bitcoin fall to $7,148 to $8,700.

What to Look Forward to

While Kolovos and other analysts watching the cryptocurrency space may be bearish in the short term, most of these temporary bears seem to be long-term bulls. The Macro Risk Advisors chartist is a perfect case in point.

After laying out why he believes that Bitcoin is poised to return to at least $8,500, Kolovos remarked that BTC holding strong above its 50-week moving average and breaking out of a descending wedge in April are positive signs. In fact, he claims that through the use of “simple technical analysis”, Bitcoin reaching $20,000 is entirely logical. The Bloomberg guest didn’t divulge deadlines for his targets.

However, there are a number of commentators that have laid out theories that suggest a $20,000 or higher Bitcoin is possible in 2019. For instance, Tom Lee has noted that BTC could rally to $20,000 or even $40,000 in Q4 of this year, drawing attention to Trump’s tweet on cryptocurrency, the buzz being generated by Libra, and potentially pro-Bitcoin fiscal policies enlisted by central banks.

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