After grabbing attention of the entire financial world by spiking up in price to almost $14,000, bitcoin fell back below the $10,000 mark for some time before rising up again. At the time of writing, the leading global cryptocurrency is standing at $11,646. But what does this strong pull-back below $10k from almost $14k signify for the digital asset?
Talking to BlockPublisher about the pull-back, Jason Anthony Williams, co-founder of Morgan Creek Digital, stated:
This is a healthy pull back after a parabolic run up…This pullback is in no way out of line compared to past pullbacks within the bull market of the last three months. Bitcoin was deeply overbought.
The reason for the overbuying of bitcoin, as pointed out by Jason, can be associated with the hype that gets associated with the asset every time a bull-run is in effect. The bull-run that bitcoin saw back in 2017 took its price from a few thousand dollars to almost $20,000 in a matter of days. This resulted in a lot of early adopters and timely investors to siphon off huge amounts of profits from the digital asset.
We went from “New $BTC ATH incoming! $100k Bitcoin a certainty” to “2019 BTC new lows incoming!” over the span of like 3 days
I love crypto twitter so much
— Rob “Crypto Bobby” Paone (@crypto_bobby) July 1, 2019
The term “bitcoin millionaire” also started getting used for some who stepped in and cashed out just at the right moment. Media hype plays a huge part in bringing the attention of the general public and the investor community towards the rising bitcoin price thus inviting them to step into the bitcoin world. This, in turn, results in the price getting even higher based on the simple supply-and-demand market principle. The expectations for getting profits as a result of a bull-run thus get developed with every spike.
Bitcoin was floating around in the lower $4,000s at the start of the April and things had largely been bearish for it before that going as far back as its previous bull-run. In a matter of months, the asset has spiked past the $10k level, an increase of more than double its April price.
This spike thus drew media attention and once again, all investor-eyes got fixated on the asset’s price movement. The fear of missing out (FOMO) on a once in a lifetime opportunity to make a quick buck is what drives in more people each time with a price spike and this is what results in over-buying.
The $13,000 plus level probably just was a result of this over-buying and with this recent price pullback, a more realistic picture of the asset is portrayed.
— Peter Brandt (@PeterLBrandt) July 2, 2019
Although it might be healthy for bitcoin to get affected by a pull-back in order to gain a more natural market progression, it has also once again exposed a serious flaw in the asset: volatility. Volatility is an issue that has been associated with bitcoin since its inception.
Although volatility is a factor that brings in new investors into this space with the hopes of making huge profits, it is also something that stops it from becoming a global payment channel owing to the price uncertainty. Bitcoin is termed as the “digital gold” by some of its proponents. If it is to rival actual gold, maybe it needs to follow one or two essential features of gold as well.
Despite the pull-back, proponents of bitcoin and the crypto space are still expecting a prolonged bull-run. With the recent upward rebound after the pull-back, the expectation for crossing the ATH are also being developed once again. One thing is clear amid all this, it is a very uncertain space, anything can happen. One day you might see the asset down on its knees and the very next day, through the roof.
Absolutely no reason to panic or take irrational decisions.
This is just another attempt to take our $BTC.
— Galaxy (@galaxyBTC) July 1, 2019