After the recent rapid rally, the bitcoin (BTC) market is likely to take a breather before continuing its rise toward the end of the year, analysts told CryptoX.
“The cryptocurrency may consolidate for a short period before moving higher into Christmas,” said Chris Thomas, head of digital assets at Swissquote Bank.
Indeed, further notable gains look unlikely in the short term, as the cryptocurrency’s 60% rally from $9,800 to $15,900 seen over the past two months looks overstretched, per the technical charts. Both the 14-day and 14-week relative strength indices are hovering well above 70, indicating overbought conditions and scope for consolidation or minor pullback.
Echoing Thomas’ comments, Patrick Heusser, senior cryptocurrency trader at Zurich-based Crypto Broker AG, expects bitcoin to consolidate in the range of $14,000 to $16,000 in the next few weeks. However, he expects the pause to allow a rally in alternative cryptocurrencies, most of which have lagged bitcoin in the past two months.
Others suggest bitcoin may be heading for more than consolidation. “Bitcoin is overbought after surging through critical resistance at $14,000, which suggests we could see a period of correction and consolidation,’ Joel Kruger, a currency strategist at LMAX Digital said.
Historically, bitcoin has seen multiple pullbacks of over 20% in previous bull markets. This time, however, a big drawdown looks likely as sell-side liquidity appears to have dried up with the increased institutional participation and strong holding sentiment among investors.
While observers stand divided on whether prices would consolidate or retreat in the short term, there seems to be a consensus that bitcoin’s long-term prospects are bullish, with some anticipating a re-test of the record high of $20,000 by the end of December.
“We expect short-term volatility alongside even more powerful upward trends, flirting with $20,000 before year’s end and, if the stars align, $50,000 to $80,000 by the end of 2021,” Jehan Chu, co-founder and managing partner at Hong Kong-based trading firm Kenetic Capital, told CryptoX. Investor sentiment has never been better, Chu added.
Swissquote’s Thomas also expects a weaker dollar and political uncertainty in the U.S. to power bitcoin higher in the long run.
All things considered, bitcoin is likely to maintain its overall upward trajectory. “Look for the market to establish above $20,000 in 2021 before the next major upside extension into the $30,000-$40,000 range, Kruger said, and added that, “any major setbacks should be well supported above $8,000.”
Bitcoin’s upward momentum has stalled since prices hit $15,971 on Nov. 6. At press time, the cryptocurrency is trading near $15,665, representing a 2.3% gain on the day, according to CryptoX’s Bitcoin Price Index.
