Bitcoin broke through the $22 thousand mark. What to expect from the first cryptocurrency

Rates of leading digital coins showed sharp growth and updated local maximums. Experts explained what led to this and how events on the digital assets market will develop in the near future

Bitcoin broke through the $22 thousand mark. What to expect from the first cryptocurrency

Last weekend, on July 16 and 17, rates of major cryptocurrencies showed smooth growth and on July 18 morning sharply strengthened to local maximums: bitcoin value exceeded $22.3 thousand and Ethereum reached $1.49 thousand mark. Total capitalization of cryptocurrencies was $1 trillion with daily trading volume of $116 billion.

I will explain the reasons of such growth of cryptocurrency prices and give my forecast concerning the price behavior of digital assets in the nearest future

Growth Drivers

There are several reasons for this price spike. The traditional financial market is moving up, and the correlation between cryptocurrencies and traditional finance is strengthening. It can be assumed that in case the S&P 500 index moves 5-7% up, a 50-70% jump in cryptocurrency prices will be possible, the expert admitted.

Another reason is one of the largest accumulations (buying assets to hold in anticipation of a higher rate) of cryptocurrencies in history. According to Glassnode, investors are aggressively accumulating bitcoin: Whales (wallets with a balance of more than 1 thousand BTC) already own more than 45% of the entire bitcoin supply and are adding 140 thousand BTC to their accounts every month.

The owners of cryptocurrency with a purse balance of less than 1 bitcoin also continue to accumulate bitcoin: they invest about 36.7 thousand BTC per month. Only miners sell cryptocurrency – about 3-4 thousand BTC per month, according to analysts at Glassnode.

Conditions for a breakdown of the range for cryptocurrencies upwards have been forming for a week and a half. He explained that on one side, there were spurts of individual tokens and cryptocurrencies indicating increased demand from market participants.

“We’re very close to a breakout.” In which case bitcoin will continue to rise on the other hand, there were massive capitulations of certain categories of players, such as mining companies dumping significant amounts of BTC, the expert added. All this eliminated the pressure on cryptocurrencies in recent months, and the psychological support at the level of $19 thousand (the maximum of the bull cycle of 2016-2017) became the basis for the purchases of BTC by margin players.

The positive news about the successful testing of the Ethereum network’s transition to the PoS consensus mechanism was also a driver of growth last weekend. This news stimulated investors to buy ETH, which locally boosted the value of the token and pushed up, including the price of BTC, as the main asset.

According to the expert, in general, the scale of price changes for both assets is quite normal for the cryptocurrency market and can be explained by the usual technical correction during the ongoing global trend to fall.

Near-term outlook

The recent local uptrend is well within the standard patterns of market behavior. Despite the psychologically noticeable increase of the rate, the price grew by only about 8% in the last week.

In general, such a positive background for the market may remain quiet for about a week and a half, the expert suggested. After that the market will reach a point where its future fate will be decided.

The most probable scenario when bears will continue to push the market lower, and by August-September it is possible to updΠ°te the minimums of October 2020 and approaching closely to the most important psychological level of $10-11 thousand.

If the market manages to hold the current positions for more than two or three weeks in a row, risks of further decline will noticeably decrease. In this case there will be a real reason to believe that we’ve “hit the bottom” and that after a short lull there will be about two years of stable growth.

The trading volume on the background of price growth remains quite moderate, but the number of transactions of large market participants (wallets with balances more than 1 thousand BTC) has not increased significantly. All this points to the probability of continuation of lateral dynamics, but in a wider range.

I’m sure, that so far the market has only formed the intermediate bottom within the cycles, while the fundamental and on-chain indicators suggest that few market participants are willing to bet on the fact that the lows of the whole year are forming now. It could be another couple of months before the price rises in earnest, that is, passes the $45,000 mark.

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