City Index | Jun 26, 2019 14:31
The last time Bitcoin dominated the media Q4 2017, it jumped from under $10,000 to just below $20,000 in under a month.
Bitcoin’s recent rally has seen the cryptocurrency soar from the clutches of a bitter bear market at $5000 in early April to $12,935.58 overnight, its highest level since January 2018. Bitcoin jumped 15% in one of its largest one-day rallies in over a month, whilst booking its 8th straight session of gains. Can Bitcoin maintain the rally this time?
Facebook (NASDAQ:FB). Bitcoin’s popularity has soared ever since Facebook announced that it would be launching its own cryptocurrency, the Libra. This is a big deal for cryptocurrencies. We only have to think back to last year when Facebook pulled its support of ICO’s on their site and the price of Bitcoin crumbled.
Facebook’s digital currency has been created as a means of payment and for international money transfers. It still has a lot of hoops to jump through as far as regulation is concerned but it certainly has the industry on its toes.
By launching their own cryptocurrency, Facebook are giving legitimacy to crypto’s across the board. When a tech giant like Facebook jumps behind cryptocurrencies, mainstream acceptance is much more probable, boosting future demand expectations. This is being interpreted as a massive vote of confidence from a hugely important player. Not something the markets are going to ignore. As with all limited resources, higher demand can have a significant impact on the price, and quickly.
The rally in late 2017 was based largely on fear of missing out (FOMO) as the world started learning what Bitcoin was. Google (NASDAQ:GOOGL) trends data for Bitcoin showed that interest in Bitcoin was much greater then than it is currently. Another important difference is the number of transactions per second on bitcoin’s blockchain, 3.5 transactions per second*. This level was only briefly reached in 2017 before it fell. So certain facts and figures do support a longer-term rally.
Yet whilst fundamental factors are aligning in support of Bitcoin, there are still some potential headwinds in the not to distant future. A halving event, when the mining reward is cut by half overnight, is scheduled for May next year. Litecoin is due for a halving event in August which could have a negative impact on cryptocurrencies across the board.
Technically, the chart also raises some questions over the duration of the latest rally. Whilst Bitcoin remains firmly above its 100 & 200 sma, the RSI indicates overbought conditions. Bitcoin has rallied 133% so far this quarter. Bulls often take a breather after such a stellar rally, as a result a correction can’t be ruled out.
*Data from Blockchain
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Written By: City Index
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