Bitcoin’s price remains stagnant in the mid $3,000s with no sign of breakout in sight. Volume remains low and sideways trading is the norm. Should this pattern continue, further decline is almost certain. Opinions are divided in regards to long term performance but almost all opinions agree that a short term recovery is unlikely. The problem is that Bitcoin’s few catalysts are entirely dependent on government action and countered by bad actors.
The U.S. government is single handedly determining the future of the entire crypto space. The SEC is taking action against ICOs while deliberating the approval for a Bitcoin ETF. And the CFTC is considering the addition of Ethereum Futures market. Although crypto has a global reach, America is still the largest financial market and has a massive technological presence. This makes the U.S. indispensable in the development of projects and their pricing, but it also makes it responsible for its setbacks.
Case in point, in 2018 the SEC unilaterally stepped up its enforcement against ICOs and its associated parties. However, these actions lacked clear legal footing and consequently, inversely added to the bear market. And now the CFTC is seeking public input in relations to the CBOE’s request to offer Ethereum Futures, which might even lead to an Ethereum ETF. The wait for public response and the procedural time required to examine it will likely cause further delay for the launch of the BAKKT exchange. The reasoning behind both agencies’ slow and meticulous approach is to mitigate manipulation.
It is well suspected that a number of wealthy investors influence the performance of the market thought their purchasing or selling of Bitcoin. Volatility unexpectedly causes prices to surge or decline without explanation. However, published studies like one published by the University of Texas in June 2018, sheds light on how manipulation occurs. The study describes how Tether was “used to provide price support and manipulate cryptocurrency prices.”
Betting against or in favor the price of Bitcoin also guides the direction of the market. Though as prices decline, it is becoming more difficult to short Bitcoin. Surprisingly, this presents a viable opportunity for a price rally and to open near term long positions.
Bitcoin is now a new investment asset class and the target of special interests. Financial institutions want to secure total custody of it, speculators want to trade it, manipulators want to control it, and the U.S. government is trying to make sense of it all.
In the meantime, the RSI is low, presenting a valuable opportunity to acquire it wholesale. However, the struggle between those seeking to control it and those who want to regulate it is creating a stalemate. It is no secret that innovation, interest, development, and sporadic adoption is priming crypto for expansion. However, as the much publicized end of the year bull run failed to materialize, the chances for near future growth is minimal.