Bitcoin is officially below $6,000 again. A few weeks ago, crypto analyst Willy Woo predicts that Bitcoin is likely headed to mid-$5,000 before any sort of recovery can be seen. And because of this, there are serious questions regarding overly optimistic predictions such as that by Tom Lee saying that Bitcoin is likely going to surpass its all-time high this year and reach $25,000 in 2018. Since we only have roughly six months left before the year ends, many are already asking questions whether this is a realistic prediction or not.
What Makes Bitcoin Bearish?
There are different issues surrounding the crypto world today that may have contributed to the bearish trend experienced by the market. There is that allegation that Bitcoin’s price last year was manipulated in order to reach almost $20,000. John Griffin who is a researcher at the University of Texas released a whitepaper saying that Tether was used to manipulate Bitcoin’s price. He mentioned that “I’ve looked a lot of markets”. He added that “If there’s fraud or manipulation in a market, it can leave tracks in the data. The tracks in the data here are very consistent with a manipulation hypothesis”.
In addition to this, there are regulators that are tightening up the rules in order to protect investors and to prevent criminals from using the crypto industry.
Reasons for Optimism
So is there really anything reason left to stay optimistic about Bitcoin and cryptos? If you will ask Brian Kelly who is the founder of BKCM, he pointed out that there are three major reasons why Bitcoin is going to recover to over $10,000.
One, there is the negative sentiment from investors which signals the imminence of a bottom. This means that a major correction of the crypto market is most likely going to occur during the next two to three months. And also, we can expect a mid-term rally in the fourth quarter of this year.
Next, you also have the positive development in the crypto exchange market in Japan. The Japanese government made the necessary efforts not only to tighten up their regulations but even planned to cooperate with other major economies in order to create regulatory clarity for the businesses. And this could potentially lead to regulatory clarity that the market is looking for. And hopefully, this could actually initiate the entry of institutional investors.
Kelly said that “Japanese exchanges were ordered to improve business conditions (by the government). It’s actually a good thing. Short run it’s going to be a little tough because they’re stopping new accounts from coming in but actually they’re cleaning up the system. They’re making sure it’s more robust. Making sure it’s better for people”. It has been reported that the biggest crypto exchange in Japan stopped opening of new accounts in adherence to these new laws.
Lastly, you have the fact that Mt. Gox sell-offs of tens of thousands of Bitcoin that have led to the bearish trends are probably towards the tail end. By early 2019, it is expected that sell-off is already over.
