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Bitcoin Tests $6000: Market Correction Or A Spurt?
Author: changehero
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Within the last two weeks, the BTC price rose up by nearly 40percent against the U.S. dollar that is currently around $5,900. In the upcoming weeks, traders are likely to focus on evaluating various incentives that may push BTC above the crucial $6,000 level.

Over several hours on May 3, the price of bitcoin spiked from around $5,300 to over $5,700 in major markets, allowing the crypto market to gain more than $7 billion in a single day.

Bitcoin price chart for 2018 and 2019
Source: CoinMarketCap

Major crypto assets such as Ethereum, Litecoin, Bitcoin Cash recorded gains in the range of 4% to 8% against the United States dollar, fueling the momentum of the crypto market. What cause such impulses in crypto space towards BTC and other crypto assets? Let’s take a closer look in this article together with ChangeHero!

What factors boost BTC?

It is difficult to judge what was the main reason for the BTC soar. Experts are arguing, what changes on the crypto market could probably catalyze BTC growth, for example:

1. Tether scandal influence:

As the market recovered fairly quickly from the Tether scandal, it likely boosted the confidence of existing investors on the market.

According to the Coin eToro CEO Yoni Assia suggested that the incident could serve as a catalyst for the near-term rally of bitcoin: “Are the news supposed to pump or dump BTC? It’s bad news, but if $2 billion USDT get exchanged to BTC it actually increases its price… what a predicament. Tether Lawyer Admits Stablecoin Now 74% Backed by Cash and Equivalents”.

Yoni Assia about Bitcoin price movement
Source: Twitter

As Tether holders began to sell the stablecoin for bitcoin — anticipating the stablecoin to lose its peg to the U.S. dollar — it may have driven the demand for the asset on paper. Tether investors buying bitcoin to either keep their funds in bitcoin or to sell for fiat could have fueled the momentum of the asset.

On April 25, New York City Attorney General’s Office (NYAG) Letitia James filed a lawsuit against iFinex, claiming that Bitfinex was using $900 million taken from Tether’s cash reserve in an attempt to “hide” its losses of $850 million.

2. The upcoming BTC mining reward halving:

Bitcoin is set to undergo a mining reward halving in May 2020 and historical data indicates the process tends to put a bid under the cryptocurrency at least a year in advance. (The protocol automatically reduces new issuance after a certain number of blocks are processed, an event that occurred most recently in 2016).

Markets first took note of this possibility in December 2018 after the sell-off ran out of steam near $3,100. The particular price pattern was reminiscent of how the previous bear market had ended at lows near $150 in early January 2015–17 months before a reward halving in August 2016.

Indeed, historical data shows that bitcoin traders generally respond to the halving and that the event serves as a signal and potential catalyst.

The narrative that BTC is set to repeat history by breaking into a bull market at least a year ahead of the next mining reward halving (due August 2020) has only strengthened over the last three months, possibly leading to the bull breakout.

Indeed, analysts had been arguing for months that with the next bitcoin halving expected to happen in May 2020, the time had come for investors to start paying attention to this pattern.

3. Technical indicators for BTC bullish momentum:

According to the analyst, throughout the past two weeks, technical indicators were pointing toward a bullish momentum for Bitcoin. In the end of February, Bitcoin’s 50-week moving average dropped below the 100-week moving average, confirming a bearish crossover. At the time, the lagging indicator had turned bearish for the first time in four years, suggesting bitcoin’s price may have bottomed out after a year of declining prices.

That, however, was just the beginning. Several longer duration indicators, like the weekly money flow index (MFI) and the moving average convergence divergence (MACD), would add evidence to the trend. On March 4, the MFI bottomed, contradicting the lower low in Bitcoin’s price.

That bullish divergence is widely considered an early warning of a bearish-to-bullish trend reversal. A rising MFI indicates an increase in buying pressure, while a falling MFI is considered a sign of increasing selling pressures.

The same day, the MACD, a momentum oscillator calculated by subtracting the longer-term moving average from the shorter-term moving average, also turned bullish.

Thus, there are many signals on the market, that could be interpreted as the reasons for BTC growth. But could BTC keep this peak and for how long? Would it go up or down, how soon?

Is BTC able to maintain its position on the market?

Several prominent investors in the crypto space such as Vinny Lingham from Multicoin Capital have said that bitcoin surpassing the $6,200 to $6,400 range would officially signal the beginning of a new bull market. Lingham said:

“The key indicator for the start of a sustainable bull run is likely a decoupling of asset values from Bitcoin (i.e. Bitcoin’s strength weakens other networks or vice versa). Anything else is just speculation again (maybe we need another bubble to learn more lessons?”

“That said, if we can break $6,200 for BTC, it will likely mark the start of another major bull run and could run hot and high, but if it’s pure speculation and other assets benefit disproportionately to value created, it’s likely not going to end well again!”

Vinny Lingham shares his thoughts on Crypto Winter
Source: Twitter

But, some traders in the cryptocurrency sector remain cautious on the short-term trend of the asset because of both technical and fundamental factors.

Don Alt, a cryptocurrency technical analyst, for instance, said that the Bitfinex premium indicates the lack of stability in the market that could potentially leave the asset vulnerable to a drop below $5,000.

DonAlt says that Bitcoin will hit $5K soon
Source: Twitter

In recent months, bitcoin has largely depended on momentum and technical factors to record upside movements.

The highly anticipated block reward halving that is expected to occur in May 2020 is considered a strong fundamental factor that could serve as a solid catalyst for the medium-term price trend of the asset.

In the foreseeable future, while some traders have expressed concerns about the Tether controversy, others said that if investors dump Tether on the market, they will likely end up buying bitcoin, further pushing the demand for the asset up.

Hopefully, positive forecasts will be confirmed and we will see an even greater increase in BTC and all the other cryptocurrencies in the near future.

On our platform ChangeHero, you can buy with the credit card and exchange BTC and 130+ other currencies anonymously, without any limits and with the best rates among 10+ exchanges. We are always happy to support you with great crypto exchange service, regardless of the market situation at ChangeHero!

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