Bitcoin prices have bounced back recently, climbing more than 25% over roughly four days and showing that the sentiment surrounding the cryptocurrency can remain strong even after sharp losses.
The digital currency rose to as much as $3,929.10 today, a more than 25% increase from its 2018 low of $3,122.34 reached on December 15, CoinDesk bitcoin price data shows.
[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.]
When explaining these gains, analysts pointed to factors including strong support near the $3,000 level and a short squeeze that manifested as speculators closed out their bearish positions.
Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, spoke to these developments.
“Yes, the $3,000 support level and a short squeeze has helped Bitcoin price recover, there is also a lot of media coverage around Mark Dow closing his short position, which he opened when Bitcoin was around $19,000, adding to the positive sentiment.”
Bullish Sentiment Data
Joshua Frank, cofounder of cryptocurrency analytics platform TheTIE.io, offered further data on the attitudes of traders.
He emphasized that according to data gathered by his firm, “66% of tweets mentioning the end of the year and Bitcoin are positive.”
Further, “67% of tweets that mention Bitcoin and News are positive.”
The Twitter word frequency chart below shows the most common terms that showed up in tweets regarding bitcoin, as well as the number of those tweets which were positive, neutral or negative.
A few analysts emphasized that while bitcoin prices have recovered lately, investors should still be cautious.
Marouane Garcon, managing director of crypto-to-crypto derivatives platform Amulet, emphasized that while the recent price rally points to positive investor sentiment, “traders must be careful as this may be a fake out.”
“Right now it isn’t a good time to buy and it hasn’t been for a while,” he added. “It’s too choppy.”
“While there are bullish signs since the December 15 Bitcoin low, a 25% rally is not enough to indicate there’s a strong case for much higher prices,” noted Jon Pearlstone, publisher of the newsletter CryptoPatterns.
“Price now needs to achieve a 100% move from the bottom just to get back to the key support at $6000 that held through most of 2018,” he emphasized.
“We’re nowhere near where we were a month ago, let alone a year ago,” noted Mati Greenspan, senior market analyst for social trading platform eToro,
“But we’re way above anything that we could have imagined two years ago.”
“Price can be a slippery indicator when trying to measure growth,” he noted.
Disclosure: I own some bitcoin, bitcoin cash and ether.