Should You Buy Bitcoin Now?

Aug 16, 2018 | Abundant Insight, Blog

In 2017, Bitcoin’s price went from $1,000 to $20,000. This huge growth attracted a lot of new investors into cryptocurrencies but since January 2018 the price went down significantly and reached around $6,000 at his lowest point. As of August 16th, 2018, Bitcoin is at $6,400 so the question is: Is now a good time to invest in Bitcoin?


Price Downfall

Bitcoin’s price lost around $14,000 from its highest point in December 2017 to its lowest in June 2018. This came as a surprise for many new traders and investors in the cryptocurrency market as the bull market showed very strong momentum throughout Q4 2017. Many thought that 2018 will see Bitcoin’s price go a lot higher but so far it didn’t happen. There are many reasons for that and we’ll elaborate on three perspectives that could expian that drop.

The first one is be the Mt. Gox sell off. Between December 2017 and March 2018, the trustee for the former Bitcoin japanase exchange sold more than 35,000 bitcoins. Even though it is always difficult to tell exactly if that alone had a strong influence on Bitcoin’s price, it definitely spread fear in the market especially for those new retail investors and we believe that the actual sell and the FUD (Fear Of Uncertainty and Doubts) contributed to the price downfall.

The second perspective is Bitcoin’s being listed on the CME (Chicago Mercantile Exchange) and the CBOE (Chicago Board Options Exchange) in December 2017. These futures contracts allowed institutional investors to come in the game and short sell the price of Bitcoin. We believe that his has had an impact on the Bitcoin’s price and the cryptocurrency market in general.

The lack of Bitcoin’s use cases can be seen as the third perspective explaining its price downfall. As of now, yes you can use Bitcoin and other cryptocurrencies to transfer value to anyone in the world but you can only purchase something with it on a very limited selection of shops or websites. Bitcoin hasn’t managed to become a real currency yet and has mainly be used as a speculative tool and trading instrument. We believe that Bitcoin’s price will go up it is used by an ever increasing amount of people.

The Current Situation

The following chart shows Bitcoin’s price evolution on a daily time frame from January 2017 to now:

As we can see here, Bitcoin is still in a correction phase after 2017’s spectacular growth. In May 2018, Bitcoin failed to break the crucial resistance of $10,000 but has found strong support around the $6,000 area multiple times. This $6,000 – $10,000 can be considered ‘neutral’ and it is hard to predict what will the prices do as long as it stays there. A significant drop below $6,000 will definitely expose the next big support at $3,000 which can be considered as a good buying opportunity even tough $1,000 can also be reached if $3,000 doesn’t hold. On the flip side, ff Bitcoin’s price manage to break the $10,000 resistance, this could be seen as a strong bullish signal and the potential continuation of the bull market.

Since the price has yet to give us a clear indication of where it is going, we therefore recommend everyone to be patient and wait for a solid oppurtunity and a clear direction before buying Bitcoin.