Bitcoin prices have experienced some notable gains lately, rising to a fresh, multi-month high over the weekend at a time when many variables point to the potential for compelling gains later in 2021.
The world’s most prominent digital currency rose to $48,126.47 on Saturday, August 14, CoinDesk figures reveal.
At this point, the cryptocurrency was trading at its highest since May 16, additional CoinDesk data shows.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
The innovative digital asset experienced these gains after markets reacted to a Bloomberg article published Friday, which helped offer some clarity for industry participants.
Citing a Treasury department official, the article stated that the IRS plans to specify that market participants will only need to comply with recently proposed reporting requirements if the government agency considers them brokers.
After climbing to its highest in almost three months, bitcoin fell back somewhat, declining to almost $45,600 yesterday, before rallying above $48,000 again today.
Jesse Proudman, co-founder and CTO of crypto hedge fund Strix Leviathan, spoke to these developments.
“Bitcoin rose over the weekend on the back of news that the IRS will disregard the crypto guidance in the recent Infrastructure Bill, choosing to enforce tax reporting requirements only from brokers that meet the traditional definition of the term,” he stated.
“Concerns over the possibility that miners, developers and other non-brokers would have to meet reporting requirements that aren’t technologically possible caused enough uncertainty that Bitcoin dropped almost to $44,000 on Friday morning, only to see a strong rebound over the weekend,” the executive noted.
He also offered some perspective on the digital currency’s recent momentum, stating that since the aforementioned fluctuations took place, “Bitcoin has demonstrated robust support for us to continue the trend of higher highs and higher lows.”
Jake Wujastyk, chief market analyst of TrendSpider, weighed in on the digital currency’s latest price movements, stating the following:
“Bitcoin has recently had a huge run from $29k to $48k within a span of less than a month. Whenever this type of move occurs in such a short period of time, it is natural to have some profit-taking with prices pulling back to key levels below, which a lot of the time are simply points on the chart where the breakout occurred.”
“In this case, Bitcoin was met with supply right around the $48k area shown by the anchored volume by price measuring volume distribution from the start of the year,” he noted.
“This ‘breakeven supply’ zone around $48k will continue to act as a level of resistance until the price can close above it.”
Wujastyk also commented on the digital currency’s support.
“In regards to downside levels, the main area to watch would be the anchored volume-weighted average price from the ‘all-time highs’ which was the main breakout level that Bitcoin was able to break through back in early August. This area is currently right around $42k.”
“However, as the price continues to trade above this level, the volume-weighted average price will start to slope up and this level will change with time as price action evolves,” he stated.
Julius de Kempenaer, senior technical analyst at StockCharts.com, provided some similar input on the matter.
“After breaking out of the $30k-$42.5k trading range BTC rapidly accelerated to the next area of resistance between $47.5k-$50k where we are currently still trading. The old resistance area (the top of the former range) around $42.5k should now act as support and catch any declines from current levels.”
“If any decline is caught and a new low is put into place at a level higher than $42.5k that is a sign of strength,” he stated.
“It means that buyers are aggressive and are willing to come in at higher levels.”
He also spoke to the digital currency’s key resistance.
“$47.5k – $50k is the hurdle BTC is currently facing,” said de Kempenaer.
“It is derived from the major lows that were formed in March and April of this year. Breaking beyond that range will free the way for a further rally towards $60k.”
While some experts shed some light on bitcoin’s key levels of support and resistance, several analysts spoke to the digital currency’s favorable backdrop, a combination of factors that could cause notable upside in the coming months.
Proudman weighed in, emphasizing several key metrics that could portend gains.
“With a recent rebound in active wallet addresses, new wallet addresses, and on-chain transactions, all indicators that are often a sign retail traders are increasingly active in crypto, and Bitcoin $50,000 on the horizon, we believe the remainder of 2021 has the hallmarks of an exciting time to be involved with this asset class.”
Sean Rooney, head of research at Valkyrie Investments, also spoke to the situation.
“Expect the discussion around bitcoin as ‘a hedge to inflation and uncertainty’ to be reinvigorated as the macro picture takes shape heading into Q4,” he stated.
“Judging by the accumulation pattern over the last couple months, there will be less bitcoin available on exchanges, which should create a tailwind for price.”
William Noble, the chief technical analyst of research platform Token Metrics, offered his point of view, emphasizing that while many market observers have been scrutinizing bitcoin’s day-to-day price movements, they should “zoom out” and take a more long-term view.
“Monday’s dip was a result of a Fed announcement of tapering in the second half of 2022,” he stated.
“The Covid situation may become worse by the end of 2021 and into 2022. If this proves true, the Fed will likely have to print more money, not less,” added Noble.
“This might create a golden opportunity to buy BTC on small dips at $43k.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.