Suspense Lingers as Bitcoin's Price Eyes $1,000
Markets Weekly is a weekly column analyzing price movements in the global blockchain token markets. This edition looks at the week from 24th through 30th December.
Bitcoin prices pushed higher this week, benefiting from strong market sentiment, but ultimately failed to break through key resistance and reach $1,000.
For those who weren't watching eagerly, the digital currency rose to a nearly three-year high of $982.87 on 29th December, CoinDesk USD Bitcoin Price Index (BPI) data reveals, before declining to a press time value of $960.
As noted in previous coverage, these figures represented signifcant gains, with the price rising almost $150 at points week over week. Still, the failure to surpass this level notably coincided with a glut of sell orders between $950 and $1,000 on exchanges Bitfinex, OKCoin and Bitstamp.
"It’s a classic resistance level," said Tim Enneking, chairman of cryptocurrency hedge fund EAM, pointing to the sell orders limiting bitcoin’s rally.
Algorithmic trader Jacob Eliosoff also noted the difficulty of surpassing $1,000, given that psychological levels frequently have "extra clusters" of orders.
Bullish market factors
While bitcoin prices have encountered resistance lately, the digital currency is still benefiting from a combination of robust demand and strong market sentiment.
"Bitcoin is on a tremendous bull run and, despite the pullbacks, that run is still very much in play," said Petar Zivkovski, COO of leveraged bitcoin trading platform Whaleclub.
A great deal of this, he said, is simply fear of missing out (FOMO), as many traders chase after quick profits.
Zivkovski pointed out these developments at a time when market sentiment is overwhelmingly bullish, with Whaleclub data showing the market has been at least 90% long during every session between 24th and 29th December.
He noted that traders "refuse to let go of their long positions despite the relatively big swings and pullbacks", adding:
"This indicates that the market still expects ample upside in price.”
Yet, if the digital currency does breach this key psychological level, nobody knows where it will go next.
Surpassing this price point could provoke a large number of sell orders, but it might also provide bitcoin prices with a new support level.
Zivkovski stated that "$1,000 and beyond is reachable in the near future," even if the digital currency experiences a pullback to the low $900s or even the $800s before doing so.
Joe Lee, co-founder of leveraged bitcoin trading platform Magnr, emphasized the importance of this price level.
"$1,000 is a significant price point that traders from all jurisdictions will be observing," he told CoinDesk.
"At this stage technical traders will be pointing to charts showing overbought signals due to significant jumps in price within a short space of time. It is unclear whether the frenzy to own bitcoin and the underlying demand for the asset will overcome short sellers believing we are near a short-term high."
But, while the price of bitcoin pushed higher this week, it was not the only digital currency to enjoy notable gains.
Ethereum classic pushes forward
Ether classic (ETC), the token that powers the smart contract-based platform ethereum classic, surged more than 50% this week, pushing higher as the network showed several signs of progress.
ETC rose to as much as $1.63 on 30th December, its highest price since August, CoinMarketCap data reveals. This figure represents a roughly 55% increase from its opening price of $1.05.
The digital currency rose to this four-month high as transaction volume picked up, with 24-hour trading volume totaling $8.2m on 29th December and repeatedly exceeding $10m on 30th December, additional CoinMarketCap figures show.
On the technical front, ethereum classic is looking forward to a protocol upgrade, named DieHard, which is scheduled to take place mid-January.
This update will aim to give the network more time to implement upgrades by postponing the difficulty bomb, a feature programmed into both ethereum and ethereum classic to speed up the adoption of upgrades.
The DieHard upgrade will also contain updates that make the ethereum classic network less vulnerable to spam attacks and also protect the network from replay attacks, which can happen if the ethereum network sends instructions to the ethereum classic network that were not originally designed for the latter.
The ethereum classic community is also discussing what monetary policies to adopt as it begins to chart a course for the future.
Should it differentiate from ethereum successfully, it could continue to remain an interesting asset to traders in 2017.
Disclaimer: This article is not intended to provide, and should not be taken as, investment advice.
Man climbing mountain via Shutterstock