Bitcoin’s price struggles for momentum but 'bullish rally on the horizon'

·2 min read
Bitcoin ATM near main railway station in Krakow, Poland. Photo: Getty Images
Bitcoin ATM near main railway station in Krakow, Poland. Photo: Getty Images

Cryptocurrencies were broadly lower on Wednesday morning as bitcoin hovered below the $50,000 (£36,409) mark, though analysts believe a rally in prices is not too far off.

Bitcoin (BTC-USD) hit a 3-month high above $50,000 on Monday. 

Its recovery had come as cryptos continue to gain mainstream acceptance: PayPal (PYPL) said it would allow customers in the UK to buy, sell and hold digital currencies and expands its crypto services outside of the US. 

And US-based MicroStrategy (MSTR) disclosed it had bought some 3,907 bitcoins for $177m, or $45,294 per coin, between July 1 and August 23.

But experts had feared bitcoin could fall closer to support levels around $47,000. It is now down 3.5% and trading at $47,931.

Bitcoin was down on Wednesday morning. Chart: Yahoo Finance UK
Bitcoin was down on Wednesday morning. Chart: Yahoo Finance UK

Ethereum (ETH-USD), the second biggest crypto by market cap, slumped 5% to trade at $3,167.

“Mega-investor interest suggests that a bullish rally to record-high prices is on the horizon,” said Ava Trade’s chief market analyst, Naeem Aslam.

He said big investors have exposures in excess of $50m and since June have been purchasing digital coins worth nearly $10bn.

"The whales' activity has been linked to price movement since the beginning of 2021. These investors were the driving force behind the rally seen in February, and they were also the driving force behind the price drop in March and April, when they sold off their holdings to gain returns at peak prices," he said.

“These large investors are usually in it for the long haul, keeping nearly 75% of their purchases," he added.

Meanwhile, Quantum economics founder Mati Greenspan said that for long-term holders, Wednesday’s action “means less than nothing.”

Read more: FTSE 250 hits new all-time high as pound falls

“For really short-term traders, the volatility is nice, even if the volumes aren't in full swing. For swing traders, who generally take profits after a few days or weeks, and who have been riding this trend since the local market bottom, it's extremely tempting to close out positions at these levels.

Watch: What are the risks of investing in cryptocurrency?

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