As September draws to a close, Bitcoin continues its consolidation pattern above $10,000, but what's next?
This marks the eighth consecutive week in which Bitcoin has consistently traded over $10,000, a consolidation pattern that many analysts believe could eventually lead to a bull run later this year.
According to data from CoinMarketCap, Bitcoin's price appears to be steadily stable above the $10,000 mark, although the token is trading at a slightly lower price today ($10,660) than it was a week ago ($10,930) ). Earlier this week, the price dropped to $10,220.
This is consistent with the price pattern for most of September, which has been in the range of $10,000- $11,000 since Friday, September 4.
The lack of any major volatility in the price of Bitcoin in recent weeks could mainly benefit institutional traders who have access to micro-strategy tools, while retail traders, who tend to buy and sell around higher price events, may be holding back your coins for now.
Jack Choros, Crypto Radar crypto commentator and content manager, told Finance Tycoons that "any consolidation is a good thing for the next bull run.
"Bitcoin is going to get close to $20,000 by the end of the year. Keep my words."
But is another bull viable at this point? Perhaps, but there are many factors at play.
This week, several analysts are looking to the USD for clues as to what Bitcoin can do next: "since the March 12, 2020 black swan event, the bitcoin price and the US dollar currency index (DXY) have moved inversely proportionally to each other, "commented Peter Goodrich, CPA and tax manager at Prager Metis CPAs, for Finance Magnates.
Renowned broadcaster and finance analyst, Max Keizer also observed this phenomenon, tweeting on Tuesday that "Bitcoin, like gold, is inversely correlated with the dollar".
Case in point: in recent weeks, "DXY has been consolidating on its side, as has the price of bitcoin," said Goodrich.
However, in recent days, "DXY has experienced an upward momentum, which has had a negative effect on the price of bitcoin".
In fact, in the past five days, DXY made an upward movement from around 92.89 to about 94.30, and it seemed to be continuously moving upwards at press time.
"There has been an increase in economic uncertainty as the Pandemic continues to exacerbate the global financial crisis."
While the dollar may be seeing a short-term recovery, the continued effects of coronavirus and the subsequent economic consequences on the global economy may continue to push the dollar down in the long run.
Juan Aja Aguinaco, co-founder of Shyft Network, told Finance Tycoons that "there are a large number of investors who use BTC as a hedge against fiat currency like the USD, and as a hedge against volatility in the gold and precious metals.
"There has been an increase in economic uncertainty as the pandemic continues to worsen the global financial crisis," explained Peter Goodrich to the Finance Magnates. "Governments have used the monetary policy of quantitative easing in an attempt to mitigate the effects of the global financial crisis."
"This injection of money supply into the economy has reduced the value of the fiat, which has been a major catalyst for increasing interest in cryptocurrencies, which is reflected in the total market capitalization for the asset class," continued Goodrich.
Bitcoin could benefit from a long-term dollar dip: "Bitcoin was developed as a result of the 2008 financial crisis. The next major milestone for cryptocurrency is the much-needed regulatory clarity that would bring the asset class into the mainstream. "
New regulatory developments in the US and the EU may bring more institutional investors to cryptography
That regulatory clarity may already be on the way: last week, two significant regulatory developments took place in the cryptocurrency sector in both the European Union and the United States.
Both developments had to do with the standardization of regulations relevant to the crypto space: in the EU, a leaked draft of a new set of rules for the European Commission's crypto industry known as "Crypto Markets" (MiCA) was shared on the internet . In the USA, the State Bank Supervisors Conference (CSBS) announced the launch of MSB Networked Supervision, a standard set of compliance guidelines for large monetary services companies (MSBs) in the USA.
Bitcoin's price did not appear to have any major reaction to any of these developments. However, increasing regulatory clarity in the crypto space may pave the way for greater adoption of cryptocurrencies later, particularly for institutional investors.
Ciara Sun, head of global markets at the Huobi Group, commented on the regulatory needs of institutional traders at a CoinTelegraph event in July: "Larger institutions have higher compliance requirements, but regulatory agencies have not provided sufficient guidance on digital assets in the past. .
"This unclear regulatory landscape has made it more risky for larger institutions," she said - a factor that previously kept larger institutions out of the crypto space.
Growing distrust of large financial institutions can also play a role
However, at the same time, the role of larger financial institutions may be heading towards a reduction on a global scale.
This has to do with confidence: earlier this month, the BBC reported that leaked documents involving about $2 trillion in transactions revealed how some of the world's largest banks have allowed criminals to move dirty money around the world.
Juan Aja Aguinaco, of the Shyft Network, commented to the Magnates of Finance that the "recent leak of documents from FinCEN represents a massive point in favor of crypto.
"The spill further demonstrated that traditional financial institutions are not complying with existing anti-money laundering measures," he said. Therefore, "challenging banks and other fintech startups, together with blockchain companies, have an opportunity ahead of them: show the world that they can do it better, and give users better products and services".
Even with the growing distrust of major financial institutions, the significant adoption of cryptocurrencies will take time.
Socio-political drama in the US and around the world may play an important role in the price of BTC in the fourth quarter
However, there are a number of other factors that can accelerate the adoption of cryptocurrencies worldwide.
"Without wanting to appear pessimistic, but the rest of the year looks as strange as the first half of 2020, maybe more," Juan Aja Aguinaco told Finance Magnates. "We have what appears to be a second wave of the COVID-19 pandemic reaching countries with economies that have been weakened by the effects of the first wave."
In addition, "one factor is the current political and social issues that affect the United States," explained Aguianco. Traditionally speaking, "US elections are an important driver of volatility in both the traditional and crypto markets".
However, this electoral cycle is perhaps even more significant for the global economy: the drama surrounding the 2020 US presidential election has given way to "a wave of civil unrest in the US, which may reach its tipping point during and after the next few years. Other countries around the world are also experiencing civil unrest and political changes (for example, Belarus, Mexico and Bolivia.)
"All of these have considerable effects on traditional financial markets," he continued. As such, "investors can start looking for better yields in non-traditional markets, like cryptocurrencies and DeFi to be more specific".
And, in fact, the DeFi space (decentralized finance) saw a huge boom earlier this year. A number of tokens belonging to the DeFi protocols have consistently made headlines for sudden increases in their price levels over the months of July and August.
DeFi Cooldown continues
However, September seems to have brought the DeFi space to a cooling. Of the 42 DeFi assets listed on the crypto pricing data site Messari, only five had positive price movements in the last 30 days: Yearn.Finance, Uniswap, UMA, Cream and Loopring.
Jack Choros, from CryptoRadar, commented that, although DeFi is in fact "cooling off", projects "like Ansia have real value because the price of the token is really linked to the amount of funds blocked by investors".
In other words, the prices of some of these tokens are not driven purely by speculation: "the price of the currency is linked to real value," he said. This is a good sign for the fundamentals of the project. "
Juan Aja Aguinaco, of the Shyft Network, said that part of the reason for DeFi's cooling could be related to the relative stagnation in Bitcoin's price.
"Some investors shift capital between BTC and alternative tokens in search of better returns," he said. "This battle between altcoins and Bitcoin represents a major factor influencing its price.