Will Bitcoin Rally to $20,000 Before the End Of 2018?

  • This time last year Bitcoin was just getting into the swing of its chunky 2017 bull run.
  • The week commencing 25th September 2017, until the week commencing 11th December, Bitcoin gained around 445%.

Bitcoin Rally 2017

Looking back at 2017, Bitcoin investors enjoyed a huge rally to the upside, towards the end of the year. It all started after a brief period of consolidation within mid-September. To which the following week saw the price begin to pick up some bullish momentum. Bitcoin at the time was only sitting within the early $4?000 territory. What happened next was somewhat of a freak instance. The price went on to see 11 weeks out of 12 closing with advances. Apart from one minor pullback seen the week commencing 6th November, the others saw chunky gains.

What Sparked the 2017 Rally?

There doesn’t appear to have been one catalyst driving this price excessively to the upside, however an array of points are worthy of consideration. During the middle of the year in 2017, Bitcoin started to get the attention of large Wall Street analysts. The likes of Goldman Sachs were making price predictions on Bitcoin, with other analysts starting to get involved with forecasts. That major financial institutions were publicly mentioning Bitcoin was most certainly helping it to gain greater mainstream acceptance.

It is likely that more and more investors started to become aware of Bitcoin’s inflated movements. This may have triggered some ‘FOMO’, or fear of missing out, sparking further demand. It seemed to be the case of jumping on the bandwagon. Elsewhere, the Chicago Board Options Exchange and Chicago Mercantile Exchange made Bitcoin futures available to be traded by investors, further helping with the legitimizing aspect.

Bitcoin Price Manipulation

There was much speculation across the market that some manipulation was going on with Bitcoin’s price. This appeared to originally circulate by a post from someone via a Bitcoin reddit post, creating a discussion on the conspiracy.

In June, new research hit the newswires, which heavily suggested that much of Bitcoin’s boom was due to market manipulation.  This had been conducted by a University of Texas finance professor John Griffin, who has a 10-year track record of spotting financial fraud, and a graduate student Amin Shams. Together they examined millions of transactions on the cryptocurrency exchange Bitfinex. In a 66-page paper, it was noted the authors found that tether was used to buy bitcoin at key moments when it was declining. This supposedly helped “stabilize and manipulate” the cryptocurrency’s price.

Will The Moves Be Replicated?

Since the downfall of Bitcoin’s price from the middle of December, it has created a number of big barriers. These have proven to be a challenge breaking down again given the lack of historical technical levels in 2017, as the price was trading in complete unknown territory. Back during that bullish run, the sky appeared to be the limit. Unfortunately for the price now, there are historical levels, which are now resistance/supply blocks, as seen on the charts. This makes it very unlikely to see such moves that were observed last year. At the same time, technically the price is still ahead of where it was this time in October 2017.

Markets players have been cautious to commit, given how heavy Bitcoin started falling at the beginning of the year. Bull rallies that have taken place, proved to be unsustainable, with bears quickly pilling in and selling those.

Technical Review

BTC/USD weekly chart

Firstly, looking to the downside, around the range of $5,800 – $6,000, this has been the bottom for 2018. It does appear to be sturdy and proving itself as decent support, dealing with any downside pressure, for now.

In terms of barriers ahead, there are several top areas which are likely to make any bull run similar to that of 2017 very difficult. Just to mention some; heading into 7K, 7.5K, 8.5K, 9.5K and the psychological 10K mark. These are some key territories that are going to be a nuisance for the bulls.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.