The mania in cryptocurrencies is back, and Bitcoin prices, BTCUSD, are just 1200 USD from their all-time high of $19678. On a percentage basis, BTCUSD only needs to add another 5.73% which is a relatively small return for most cryptocurrencies.
PayPal news triggers a rush to bitcoin
The trigger behind the move higher in Bitcoin prices, and other altcoins, is the news of PayPal offering the ability to purchase goods with Bitcoin and other coins, but also to store the coins with PayPal. The news might be a few weeks old, but it has undoubtedly triggered the surge in cryptocurrency prices as investors and traders buy before bitcoin becomes mainstream. PayPal will, with its move, enable 300 million people to access Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
Realistically, we are still years away from seeing a major adoption of Bitcoin because of the inherently volatile nature of Bitcoin prices. Any merchant or typical retail buyer who would like to buy an electronic newsletter, or any of the other goods and services that PayPal merchants offer, will unlikely leave a large number of cryptocurrencies in their wallet. For that to happen, I suspect price volatility in cryptocurrencies would need a drop to comparable levels of traditional fiat currencies.
Bitcoin is the winner
Bitcoin is the winner in the rally of 2020, and in fact, since the last big bubble of late 2017, bitcoin has been outperforming. The reason behind the outperformance is because Bitcoin is the oldest and most traded cryptocurrency, and at times of trouble, people prefer to hold the most trusted crypto coin. Much like people prefer to hold utility and blue-chip stocks at times of recession.
However, soon Bitcoin could be trading around the $20,000 mark, and potential profit for new investors will diminish sharply. As an example, a gain from $20,000 to $40,000 would only amount to a 100% return, but if Ethereum trades back to its 2018 high, then an investor stands to make 180%. Ripple holders, on the other hand, stand to make near 800% if it would reach its all-time high.
There is also a widely held belief amongst outsiders that one needs to buy a full bitcoin to gain access to it, while one can buy fractions of it. And this causes people to buy lower-priced coins that they perceive as affordable.
What is next for Bitcoin Prices?
All-time highs act like magnates, and it would not surprise me if we would reach that level in the next few days. However, the risk-reward ratio for fresh positions is currently not good, and I suspect investors who would like to buy Bitcoin would wait for a price correction to about $17000 before buying. If the price indeed turns lower, I assume traders will remain bullish as long as the price trades above the November 12 low of $15469.
Price targets beyond the all-time high are the $23397 level, and $28982. These levels are derived by treating the price range of 2017 to September 2020 as a large triangle. The only problem with this analysis is that triangles are notoriously unreliable patterns, yet one could have a less ambitious target than $23397.
How to trade cryptocurrencies with ATFX
Looking to trade the world's most popular digital currencies? Sign up for a live or demo account with ATFX and take up a long or short position when trading CFDs. Start trading now and benefit from the time flexibility of trading cryptocurrencies.
1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for Bitcoin in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade
Bitcoin price weekly chart
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Note: ATFX would like to remind readers that underlying Bitcoin is not backed by governments or central banks. ATFX clients can only trade Bitcoin CFD’s.