Bitcoin prices have been trading relatively close to the $20,000 level for weeks now, a development that one analyst has described as being particularly worthy of mention.
“BTC’s strength of support around $20k has been amazing!” said Tim Enneking, managing director of Digital Capital Management.
He highlighted the cryptocurrency’s steadiness at a time when it has been fluctuating near the aforementioned level since late September, TradingView Figures show.
Enneking described this relative stability as “virtually unique in the price history of Bitcoin, emphasizing that “there are comparable periods, but nothing quite like this.”
Past that, every major historical pullback in bitcoin prices has been more severe than the current drop, when this pullback is measured in terms of the percentage decline between the all-time high and the recent low, he emphasized.
[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.]
Changing Investor Profiles
When explaining bitcoin’s ability to retain support near the $20,000 level, a development that Enneking described as atypical, the analyst pointed to the shifting demographics of investors.
“In short, BTC support at this level and for this duration is anomalous. We attribute this to a change in the average BTC investor profile: more institutions and more whales (which have actually themselves sometimes become institutional investors).”
The cryptocurrency markets have changed substantially over the years, benefiting from a steady increase in institutional involvement.
This situation provides a significant contrast to prior time periods, for example the 2017 bull market, where astronomical gains were attributed to factors like the avid interest of retail investors.
While the price of bitcoin skyrocketed during that period, rising from close to $1,000 at the start of 2017 to nearly $20,000 near the end of the year, according to CoinDesk datathe gains were unsustainable, and the digital currency fell to less than $4,000 in late 2018.
Other digital currencies suffered significant declines, with ether, the world’s second-most valuable cryptocurrency, falling over 80% in 2018.
These sharp declines coincided with a period of lackluster sentiment and investment, which many described as “Crypto Winter.”
The period eventually ended, with bitcoin pushing higher in 2019, and then reaching fresh, all-time highs in 2020 and 2021, peaking close to $70,000 late last year.
An Uncertain Outlook
While nobody knows for certain what the cryptocurrency will do going forward, analysts who provided input for this article offered mixed outlooks.
Enneking, for example, offered a bullish point of view on the digital asset’s future prospects.
“Given the correlation between crypto and fiat markets, and their mutual dependence at the moment on interest rates, ie, inflation, the prognosis for BTC is good,” he stated.
“There are now abundant macroeconomic signals that inflation has peaked and, once that conclusion settles in a bit deeper, we will see BTC start to move up, probably quite strongly.”
However, Armando Aguilar, an independent cryptocurrency analyst, offered a different take on the matter, speaking to factors that could cause downside.
“Bitcoin investors seem to be holding on to their digital asset at a loss (BTC net unrealized profit/loss) according to data from Glassnode and CryptoQuant,” he stated.
“Additional market pressure and potential financial pressure could force investors to sell,” said Aguilar.
“This would move the price of BTC lower and as history repeats itself, we could see institutional investors accumulating BTC at near recent ATL levels.”
He also emphasized that falling prices could compel certain miners to offload the bitcoin they are producing to keep the lights on, a development that could create additional losses in the digital currency.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.