After experiencing a major rally in 2017, the price of Bitcoin dropped sharply in 2018. This happened as the industry continued to experience a streak of negative headlines. It also happened as the previous buyers exited their trades with a good profit.
This year, the tables have turned, and the price of Bitcoin has been gaining. Year-to-date, the price of Bitcoin has gained by more than 70%. The same is true for other cryptocurrencies like Ethereum and Ripple, which have gained by more than 40% and 60% respectively. The combined market cap of the currencies has increased to more than $279 billion. These gains have been mostly based on momentum because there was no major news associated with it.
Analysts bullish on the currencies continue to see more reasons why the price could continue rising. Yesterday, Brian Kelly, the founder of BKCM, a New York-based investment firm that trades crypto said that three things could be catalysts for the currencies. These were: investor adoption, retail adoption, and supply cut.
On investor adoption, he argued that the price will continue to rise if investors adopt the currencies. In recent months, companies like Fidelity have created solutions that help institutional investors invest in the industry. Investment firms like Blackrock have also expressed interest. At the same time, the SEC has been reviewing whether to approve Bitcoin ETFs.
On retail adoption, he argued that the demand will increase when retailers like Walmart starts accepting the currencies. Presently, no major retailer accepts Bitcoin, mostly because of how volatile it is. With its volatility continuing, it will be highly unlikely that the retailers will accept it. Also, it wouldn’t make sense because only a few people hold Bitcoins.
Finally, he argued that the limited supply of Bitcoin would make it more valuable. As you know, the total number of Bitcoins that can be mined is limited to 21 million. This means that the price should rise as supply sinks. However, the fact that Bitcoin can be forked means that another cryptocurrency can be created in thin air when there is no more Bitcoin left to mine.
The chart below shows that the price of Bitcoin reached a high of $8931 this week. It then declined and reached a low of $8457. These prices are the highest it has reached since August last year. On the chart below, the price is slightly lower than the upper line of Bollinger Bands. The momentum indicator has declined slightly while the RSI remains above the overbought level. The BTC/USD pair could continue moving higher but at this point, it will most likely retest the important support of $7000. If this happens, it will then move to retest the high of $10,000.