Has Bitcoin found a bottom?
Exactly a year ago, the price of Bitcoin moved close to the $20,000 mark. Since then, the price has fallen by more than 80% and is currently trading at $3370. One of the most vocal traders who shorted the currency on the highs was former International Monetary Fund economist Michael Dow. In an interview with Bloomberg, he said that he had started to cover his short. He said:
I’m done. I don’t want to try to ride this thing to zero. I don’t want to try to squeeze more out of the lemon. I don’t want to think about it. It seemed like the right time… They just saw it was going up and wanted a piece of it. People’s imaginations can run further when they’re not tethered to facts, when they don’t understand the issue. It allowed the bubble to be much larger and much more violent. I saw the psychological hallmarks of it and there came a point where it looked like the fever was breaking.
The interview came as traders are saying that the price of Bitcoin has bottomed. Over the past five days, the price of Bitcoin has continued moving up, gaining more than 20% of its value. This has turned into a Santa rally of sort as the stock market continues to decline. In an interview, Mike McGlone, a Bloomberg Intelligence analyst, said that Bitcoin was cheaper compared to its moving averages. He also said that it was significantly oversold as shown in the daily chart below.
While this could be the case, the problems with Bitcoin continue to persist. The cost of mining has increased significantly and the mass adoption has not been successful. Therefore, with no solid fundamentals, and people’s confidence battered, it is likely that the currency will continue moving lower.