Is a Santa Claus rally in the works for bitcoin price?
In the last five days, the original cryptocurrency’s price has jumped by 21 percent based on data from Coindesk. Around the anniversary of its peak price, bitcoin even traded above $4,000, a figure that it last saw at the beginning of this month. Coindesk suggests that a bull rally may in bitcoin price’s near term future because it has successfully followed through on an “outside reversal” candle .
A Negative News Cycle
The increase in bitcoin’s price has occurred in the middle of a negative news cycle.
Analysts at JPMorgan issued a report last week in which they stated that “key flow metrics” for bitcoin have “downshifted dramatically.” A cursory reading of bitcoin metrics conveys a mixed picture. According to data from www.blockchain.com, bitcoin’s transaction volume, which mostly consists of trading volume, has inched upwards.
However, the Network Value to Transactions ratio, a dollar measure of the number of users versus transaction volumes, has been sliding since the middle of last month. At the same time, the difficulty level for mining bitcoin has declined further after its second-biggest drop suggesting that it is now easier to miner bitcoin than previously.
The JPMorgan report also cautions that participation by institutional investors, which is vital to bring stability to cryptocurrency markets, is waning.
News of the report was followed by another story which cites anonymous sources as saying that the release of bitcoin futures contracts by Bakkt, a startup owned by the world’s biggest exchange operator ICE, will be delayed next year. This is the second delay for Bakkt, which was scheduled to debut during the second week of December.
Bitcoin’s price increase despite the negativity surrounding its outlook is similar to its rally last year. At that time, the cryptocurrency’s price reached record highs even as notable economists and bankers criticized it. Regardless of the actual cause of its current increase, bitcoin miners are sure to heave a sigh of relief. Deterioration in bitcoin’s prices has affected their profit margins. Several miners were reported to have shut down their rigs in response to the price increase.