After an incredible rally in its prices last year, bitcoin has slumped for most of this year amid growing criticism of its unsustainable valuation and limited capabilities. The original cryptocurrency crashed to a decline of more than 70% from its price at the beginning of this year. But a turnaround in its price may be in the works and bitcoin may be revving up for a year-end rally. Reports claim that indicators, technical and fundamental, are gearing up for an upward trajectory in cryptocurrency markets. As of this writing, bitcoin is changing hands at $6,351.38, 1.15% down from its price 24 hours ago. Cumulatively, the cryptocurrency is down by 63% from its peak price during the first week of this year.
The Moving Average Convergence Divergence (MACD), a momentum indicator for two moving averages for a security, on the Bloomberg Galaxy Crypto Index has entered positive territory for the first time in a month, according to Bloomberg. The Directional Movement Indicator or DMI, which is calculated by comparing current prices with the previous price range, has also turned upwards. Mati Greenspan, a senior market analyst at eToro, told the publication that all signs point towards a “Santa Claus rally in the crypto markets”.
On a more fundamental level, crypto markets could receive a boost from a wave of positive news in the near term. Bitcoin futures trading at Bakkt, a new cryptocurrency venture by ICE- the owner of NYSE – is expected to begin next month. Unlike CME and Cboe, which are cash-settled bitcoin futures, Bakkt futures will be physically settled. The introduction of physical settlement is a significant development because it addresses several concerns the SEC expressed in a letter regarding bitcoin ETFs earlier this year. Bakkt CEO Kelly Loeffler has already outlined steps to clear the decks for institutional investment in bitcoin by including compliance and custody in its offerings. The entry of institutional investors is expected to bring liquidity and stability to bitcoin and cryptocurrency markets.
Regulatory uncertainty is another factor that has been weighing on cryptocurrency markets. The SEC’s crackdown on initial coin offerings (ICOs) and refusal to clarify regulatory requirements for tokens has flattened the industry’s skyrocketing growth curve. The federal agency has also blown hot and cold over the status of prominent cryptocurrencies. (To be fair, it has clarified the status of ethereum as well as bitcoin in recent times but Ripple is still on the hook). Last week, the agency stated that it would produce plain English guidance for ICOs. The price for ethereum, whose blockchain is primarily used for ICOs, jumped at the news.