Bitcoin (BTC) price has been on a parabolic bull run since the lead up to Christmas, adding over 50% to its value in the last two weeks. But what is driving the price and is $30,000 next for Bitcoin?
Bitcoin spiked to over $28,000 on the weekend and the BTC price has since corrected to $27,100 at the time of writing. The Bitcoin price has risen around 14% in the last 24 hours and its market cap stands at over half a trillion dollars for the first time in its history.
While some investors are now eyeing a new psychological barrier of $30,000, the continued rise over the weekend may be a false start and some analyst are expecting massive corrections this week for Bitcoin.
With the Santa Rally at an end and traditional markets closed over the Christmas weekend, two factors appear to have fueled Bitcoin’s price surge over the last weekend—retail investors buying into the crypto and the mass exodus of capital from the SEC embattled Ripple Labs associated XRP token flowing into Bitcoin.
Retail Investors Pick Up Institutional Slack
With most of the traditional financial players out of the game until mid to late January, Bitcoin has continued to rise on the back of retail investor demand.
The crypto market never sleeps and with traditional markets winding down for the holidays, Bitcoin could be seen as the only investment game in town. Marc Bernegger, a Bitcoin early investor and member of the Board of Crypto Finance Group told Forbes:
“The massive price increase of bitcoin during Christmas is mainly driven by retail traders as traditional markets are closed.”
Bernegger added that he would not be surprised to see a healthy correction in the Bitcoin price as Markets open today. He said, “Compared to massive short term price gains of bitcoin in the past there are far more professional investors involved in the space today which will result in faster price corrections and decrease long term volatility.”
This year, Bitcoin has attracted a growing number of high-profile Wall street legends and institutional investors, who have been investing in Bitcoin as a potential hedge against the incoming wave of inflation that is projected to rise rapidly on the back of unprecedented government stimulus and spending to combat the coronavirus disruption.
CryptoCompare chief executive Charles Hayter said, “There is no end in sight for money printing to stop which is propelling the bitcoin narrative[…]Funds are tumbling their portfolios into bitcoin and the herd are just starting to move.”
XRP Money Flows into Bitcoin
A second major factor behind Bitcoin’s rising dominance in the crypto markets is the regulation woes of Ripple, with the United States Securities and Exchange Commission (SEC) now pursuing a lawsuit for the sale of XRP tokens which it has deemed as an unregistered security.
XRP is now the fourth-largest cryptocurrency by marketcap—the controversial token has been under serious selling pressure since news that the affiliated blockchain company Ripple is being sued by the SEC.
The SEC’s lawsuit against Ripple has already caused several crypto exchanges to delist XRP from their platforms, namely OSL, Beaxy, CrossTower, and Bitwise, which have either suspended XRP payments for the time being or removed it completely from their holdings.
As announced on Christmas, major US exchange Bitstamp, one of the largest exchanges, will soon halt XRP trading. Crypto exchange giant Coinbase is also awaiting the review of the SEC for their own plans to go public, and it appears almost certain that the largest United States exchange will also delist the token in the near future.
As a popular analyst tweeted this morning:
“A lot of #XRP money has actually flown into Bitcoin, thus adding more fuel to its rocket so Bitcoin maxis should be thanking the #XRPcommunity! Bitcoin’s dominance has surged to its highest level since mid-September 2019, surpassing 71.75% on December 27.”
Since the announcement of the SEC’s lawsuit against Ripple and XRP on Dec. 22 Bitcoin’s dominance has surged 6.5 percent higher as market participants are growing increasingly wary of altcoins with very little regulatory clarity.
Is $30,000 BTC Price Imminent?
Crypto Analyst and Bitcoin trader Tone Vays warned on Dec. 21 that should the Bitcoin price hit $30,000 by the end of the Christmas weekend, the crypto will be in the “rising too far too fast zone” which has typically lead to drastic price plunges.
Tone Vays argued in his presentation that from last Monday, if Bitcoin topped the $23,000 to $24,000 range, a pull back to just $20,000 would not be “healthy enough” and the popular crypto trader made the case for the market will correcting lower than $20K.
However, a pullback to $20,000 for the Bitcoin price seems likely to Vays if the Bitcoin bull run’s momentum manages to carry it to $30,000, as it would represent a huge correction of 30%—but dependent on the speed of BTC’s rise Vays argues that the correction could be far more drastic.
Vays said in the attached video presentation that Bitcoin may be rising too fast:
“If we go to $30K really really quickly, that creates an unsustainable environment that opens up sub $14,000.”
While Bitcoin fell short of the $30,000 price level over the weekend, a $2,000 dollar difference may not be enough to halt the potential major correction and the fast rise could still see a short term price plunge.
At the time of writing the Bitcoin price continues to consolidate around the $27,000 price level.
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