It has been a good year for crypto, with BTC forming a new all-time high of $24,300 after breaking past its previous all-time high of $19,700 made in 2017. From the low made in March this year during the COVID19 broad sell-off, BTC has risen over 600% and is still attempting to break the $24,300 mark as we speak. However, it is facing some resistance at levels above $24,000 and has been sold into every time it touches that level. While I feel in time to come, BTC will clear this resistance and go higher, that time may not be now for various reasons:
- Year-End Holiday Period with lack of participants trading in the market
- Institutional investors going on year-end holidays
- The resurgence of COVID in Europe lending some risk-off elements
- US Stimulus package which just passed has already been priced into the market
- The SEC’s lawsuit against Ripple and XRP are giving cryptocurrencies market a dark shadow
Year-End and Institutional Investors going on year-end Holiday
With the year-end festive seasons approaching, the days around Christmas may not be helpful for BTC to move higher. The Christmas period is traditionally a period of rest for most institutional investors. For instance, Grayscale mentioned that it had stopped new client onboarding onto 6 of its Crypto Trusts, including BTC. While it still will be able to accept funds from existing clients, the stoppage of accepting fresh funds from new participants will greatly reduce the funds available for the purchase of crypto, especially BTC.
The lack of institutional participation is incredibly impactful to BTC because its ascent this year has been led by institutional and corporate investors who buy it as a hedge against the debasement of their respective currencies. It is gaining popularity in US investors who deem the USA having printed too many US dollars in the past decade, and more so this year since COVID 19 has caused many central banks to embark on printing money to fund stimulus packages. Institutional investors participation is especially evident in the last quarter of this year as more institutions, and large corporations added BTC to their treasury reserve. When these traders go on vacation, there may be a vacuum created where there is no buying to support the price of BTC nor to chase it higher.
Resurgence of COVID19
Resurgence and a new strain of COVID19 found in the UK greatly spooked the markets earlier this week, leading to mass selling across all asset classes. BTC dropped $2,000 from $24,000 to $22,000 before being bought back up above $23,000 to try and reclaim lost ground. Until the air clears for COVID19, there may be some investors who are reluctant to make any risk-on trades, or that some investors could be waiting for lower levels to get in.
US Stimulus Bill Priced In
The most anticipated 2nd Stimulus Bill in the USA has finally been approved, and that $600 in cash will be given to Americans. Even though this will weaken the USD and thus be good news for the crypto market, BTC failed to reclaim the $24,000 handle.
SEC Lawsuit Against Ripple and XRP Dampening Sentiment
The SEC has just filed a lawsuit against Ripple and its two founders, claiming that XRP is a security and that the Ripple team had conducted the continuous sale of the XRP token for seven years and violated federal security laws. This news had hit the broad crypto market hard, with altcoins all taking a hit over fears that other tokens may also be on the SEC watchlist. Although the SEC specifically ruled BTC and ETH to not be securities, the broad market cooling off and XRP losing 50% over two days because of this news may have spillover effects on BTC.
All that said, PrimeXBT’s lead analyst Kim Chua remains positive over the outlook of BTC and expect it to break $24,300 once Christmas is over or once we enter the new year when the shock of the SEC lawsuit and COVID19 eases off.
Kim Chua, PrimeXBT Market Analyst
Kim Chua is an institutional trading specialist with a track record of success that extends across leading banks, including Deutsche Bank, China Merchants Bank, and more. Chua later launched a hedge fund that consistently achieved triple-digit returns for seven years. Chua is also an educator at heart who developed her own proprietary trading curriculum to pass her knowledge down to a new generation of analysts. Kim Chua actively follows both traditional and cryptocurrency markets closely and is eager to find future investment and trading opportunities as the two vastly different asset classes begin to converge.
