If you have been paying attention to Bitcoin recently, then you know that the currency has been facing some uncertain and unusual concerns lately. This has included everything from bad news for Binance and Tether to the challenge of the new regulations in the infrastructure bill.
However, despite all of these headwinds, Bitcoin has maintained steady upwards price action over the past few weeks. It has definitively broken out of its crabbing channel in the low $30,000 range that it has been inhabiting for much of the past two quarters, which has been so frustrating for traders, both long and short and short-term and long-term.
The Unpredictability of Bitcoin
Bitcoin prices can be almost impossible to forecast, but most analysts would have predicted that all of the negative news for the crypto space would have manifested in at least some downwards pressure on the price. Instead, however, the price has risen into the mid $40,000 range. The most likely explanation of this price action is that the Bitcoin market has matured. As a result, daily and weekly news updates will not lead to a significant shakeup in the price action the way that it did in previous years.
This is mixed news for Bitcoin. On the one hand, the less responsive price action means that the crypto market is less dominated by wild speculation and has more ability to maintain its level. For institutions and other users, this is positive because a more stable Bitcoin is an easier to use Bitcoin.
Is Too Much Stability a Concern?
On the other hand, it isn’t necessarily a good sign if Bitcoin is too stable. The price of Bitcoin is a signal and a way to provide information. It is a valuable way for investors and other interested parties to judge what has recently happened with crypto. When Bitcoin doesn’t respond to things that seem like they should affect sentiment, then it raises questions about what does move the price.
Understanding how Bitcoin price action works has been a mystery for a long time. There have been long periods of chaos in the price and periods of calm, and it is often not clear what is pushing Bitcoin in each era. The challenge is that Bitcoin can react to different fundamentals and different forces at different times, and it isn’t always clear why or when that shift might happen.
Understanding Bitcoin Price Action
That is why the recent price action has been a little confusing. There have been other periods when news moved Bitcoin price around, so it is not easy to tell how much of the current information is priced in and how much of it has yet to be incorporated into the price. That means if any of the news develops or if more negative news arises, Bitcoin might start to dip as investors take stock of all of the activity and information at once.
This is a challenging environment for forecasting. It’s time to be very careful about an investment strategy of taking out a long position because it is unclear when all of the news might begin to take hold of the price.
If you are unsure about whether to enter or what might happen next, remember that you can always play it safe by holding or even by switching to cash. On the other hand, if you feel confident, opening up a long might be appropriate depending on your current exposure. It is an excellent time to be cautious and careful about what Bitcoin has in store. If there’s one constant in the Bitcoin price action, it is that the currency always has the capacity to surprise you and do something that you do not expect.
