The bitcoin (BTC) price trend has quickly retreated from the near four-month high above $50,000 reached last week, likely reflecting a sell-the-news reaction to El Salvador becoming the first country in the world to adopt the cryptocurrency as legal tender on 7 September.
The El Salvadoran government purchased 400 BTC prior to the launch, helping to support the rally to $50,000. Every El Salvadorian who signs up for the government app will receive $30 in bitcoin to incentivise its usage.
With bitcoin trading back down to around $46,000 on 13 September, what is the outlook for the cryptocurrency? Should you take the opportunity to buy the dip or is it time to go short?
Bitcoin retreats following rebound rally
The bitcoin market price reached $52,853 on 7 September, as the largest cryptocurrency rallied over the summer from a low of $29,360 touched on 20 July. But it subsequently crashed by 18% to a one-month low of $43,285 on the same day as the market sold off. It has since stabilised, trading around the $44,000-46,000 level, the bitcoin price chart shows.
Cryptocurrency investors have been looking for the bitcoin value graph to return to the all-time high above $64,863 reached in April.
Billionaire investor Mike Novogratz said excess leverage in the retail market contributed to the flash crash. Novogratz told Bloomberg TV:
“I think we just got too excited and this was a little air being popped out of the balloon. The market got too long.”
A crackdown on cryptocurrency exchanges in South Korea was also weighing on the market, with an estimated two-thirds of exchanges in the country under threat of failing to meet regulatory conditions that came into effect on 24 September. Exchanges that do not expect to be able to comply must notify users by 17 September. The Korean won is one of the most actively traded national currencies against bitcoin, according to data from Coinhills. The restrictions could limit crypto trading in South Korea and have an impact on liquidity on the international markets.
But there are signs of other countries looking to adopt bitcoin. Ukraine could be the next country to accept the cryptocurrency as legal tender, with reports suggesting it could become a dual-currency nation in 2023. In the UK, the Post Office will enable customers to buy cryptocurrency through its identity verification app.
Will bitcoin go up over the long term? Where do analysts expect the bitcoin price to move?
Bitcoin price analysis: will the price rebound to $50,000 and above?
Short-term bitcoin technical analysis from CoinCodex was bearish at $46,629, with 16 indicators giving bearish signals and 13 bullish signals. The 3-day to 50-day daily simple (SMAs) and exponential moving averages (EMAs) were giving sell signals, while the 100-day averages and the weekly averages were bullish. The moving average convergence divergence (MACD), momentum indicator and relative strength index (RSI) were neutral. However, CoinCodex predicted that the bitcoin to USD rate could rise to reach $49,383 by 18 September.
Algorithm-based forecasting site Wallet Investor predicts that the average bitcoin rate will return to the $46,000 level by the start of October and reach $56,429 by the end of the year.
Analysts at Arcane Research said in a recent report: “The overall bullish sentiment towards bitcoin has been reflected in a higher basis premium in the futures market in addition to rising funding rates in the bitcoin perps, but we’re nowhere near the premiums we experienced this spring.
“This suggests that leverage is accumulating towards further upside, while the hype, for now, seems somewhat more muted than earlier.”
The analysts added: “CME has also seen a growing futures premium lately. However, the basis on the CME futures is growing far less rapidly than on the offshore exchanges. This spring, a growing gap between CME and the offshore exchanges was one of the key indicators illustrating that the market was getting over-exuberant. Thus, it is worth paying attention to this gap onwards.”
On 7 September, UK investment bank Standard Chartered issued its first cryptocurrency report, estimating the value of bitcoin between $50,000 and $175,000.
“Cyclically we expect a peak around $100,000 in late 2021 or early 2022. Beyond that, institutional flows should limit downside before the next halving of new supply in late 2024.”
However, US billionaire investor and hedge fund manager Lee Cooperman urged caution on investing in bitcoin. He told CNBC last week: “It’s not in the interest of the US government to further substitute for the US dollar.
“My guess is I’d be very careful [with] bitcoin. I don’t think it makes a great deal of sense. If you’re nervous about the world, gold to me would be a better place to store value than bitcoin.”
Recent comments by central bankers also sounded a bearish note on the future of bitcoin. Swedish central bank governor Stefan Ingves said that “private money usually collapses sooner or later”, adding, “sure, you can get rich by trading in bitcoin, but it’s comparable to trading in stamps,” Bloomberg reported.
Alejandro Diaz de Leon, governor of the Bank of Mexico, said bitcoin “is more akin to bartering because that person is exchanging a good for a good, but not really money for a good,” Reuters reported.
“Bitcoin is more like a dimension of precious metals than daily legal tender.”
It’s important to keep in mind that cryptocurrency markets remain extremely volatile, making it difficult to accurately predict what a coin’s price will be in a few hours, and even harder to give long-term estimates. As such, analysts and online forecasting sites can get their predictions wrong.
We recommend that you always do your own research, and consider the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decisions. And never invest more than you can afford to lose.
How to trade BTC with Capital.com
If you are looking to invest in BTC, you can buy it on cryptocurrency exchanges like Coinbase and Binance, and store the coins in a secure software or hardware wallet.
Alternatively, you can trade bitcoin against a range of fiat currencies, like the US dollar and euro, as well as other cryptocurrencies, like ether (ETH) and ADA (ADA), through contracts for difference (CFDs) on Capital.com.
CFDs allow you to speculate on short-term price direction without having to buy and sell the actual coin. Trading CFDs offers the opportunity to try to benefit from both bullish and bearish price action. You can either open a long position, if you expect the BTC price to rise, or a short position, if you expect it to fall.
Trade Bitcoin to US Dollar – BTC/USD CFD
As a leveraged product, CFDs are designed to maximise gains, which can be large on volatile products such as cryptocurrencies. However, you should be aware that using leverage increases the size of the loss if the price moves against your position. Be sure to do your own research before investing your money.
Make sure you understand how CFDs work before you begin, and never invest money you cannot afford to lose. Learn more about cryptocurrency CFDs with our comprehensive guide. Create an account on Capital.com to stay on top of the latest bitcoin price news, analysis and forecasts to help you identify the best trading opportunities.
Edited by Valerie Medleva
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