Bitcoin is heading for a bull market. Will the dream of $12,000 be realized soon?

After coming dangerously close to sub-$9,900 levels last week, Bitcoin appears to have regained its footing above $10,000.

In fact, things are looking up: a week ago, the price of Bitcoin was around $10,320; earlier this week, Bitcoin broke through the $11,000 mark for the first time in four weeks. At press time, the price has reached $10,950 and appears to be continuing to rise.

Bitcoin’s upward move appears to have calmed fears that it will lose its position above $10,000 in the long term. In fact, the decline that occurred last week appears to be healthy for the price of Bitcoin, a healthy correction after a period of overboughtness.

(Bitcoin price 7-day chart, source: Finance Magnates)

Additionally, Bitcoin’s upward move appears to have alleviated concerns that Bitcoin would fall back below $9,700 to fill the “Chicago Mercantile Exchange (CME) gap” that formed earlier this month. The “CME gap” refers to sudden and large movements in the CME Bitcoin futures market outside of the Bitcoin market’s normal trading hours, causing a literal “gap” on the Bitcoin price chart. Typically, when this happens, Bitcoin’s price eventually falls back to the level where the gap originally formed, “filling” the gap through Bitcoin’s price moving backwards.

However, Bitcoin seems to have managed to avoid the retracement to fill the gap this time around. What is the future of Bitcoin?

“Any rally from here would need to exceed $12,000 to set a new high for the year”

While it’s too early to tell whether the rise in Bitcoin prices is a small, short-term recovery or the start of a larger, long-term bull run, some analysts seem to think a big move could be in store.

For example, Bloomberg reported earlier this week that Bitcoin had its first buy signal since falling below $5,000 in March and then rising 200%, according to the GTI Global Strength Indicator.

Still, there are some hurdles ahead. “Other indicators suggest that Bitcoin would need to break through $12,000 to set a new high for the year if a rally ensues,” the Bloomberg report said.

$12,000 does not seem out of reach; after all, Bitcoin did exceed $12,000 several times in August. However, it is unclear whether there is enough short-term demand for Bitcoin to push the price above $12,000.

The ongoing coronavirus economic crisis is affecting Bitcoin, but experts are divided on how

Analysts appear to be divided.

For example, Steve Ehrlich, co-founder and CEO of Voyager Digital, told CoinDesk that "the price of Bitcoin reflects a belief that Bitcoin is a hedge against the overall risk of the global economy." Therefore, as international economic uncertainty becomes more apparent, Bitcoin's upward path will continue. He said: "Bitcoin is extremely resilient, and as it gains more and more adoption, coupled with better regulation suitable to support Bitcoin, it will continue to demonstrate its position as a reliable store of value."

On the other hand, some analysts believe that the shadow hanging over the global economy is not a good thing for Bitcoin.

(Bitcoin price chart so far this year, source: Finance Magnates)

For example, Joel Birch, co-founder of the cryptocurrency automated investment platform Stacked, told CoinTelegraph, “I don’t think 2020 will be some type of major bull run, largely due to the fact that the global economy is still having a major impact on the industry, just like other financial markets.” He said. However, he still has a fairly positive outlook on Bitcoin’s price increase for the rest of the year, specifically noting that the crypto market could see Bitcoin continue to maintain reasonable upward pressure and push towards the $15,000 price level.

Traders have mixed feelings about Bitcoin's future

Meanwhile, a number of other technical indicators suggest a rather mixed picture for Bitcoin at the end of the year.

For example, analytics firm Santiment revealed that weighted social sentiment towards Bitcoin is at its lowest point in two years. Weighted social sentiment is a metric that measures the overall number of mentions of the word "Bitcoin" on Twitter and compares the number of positive and negative comments. Curiously, when Bitcoin's weighted social sentiment is at its lowest, it seems to be when its price is rising. "Generally speaking, negative sentiment at extreme lows correlates with price increases, while extreme highs correlate with price pullbacks," Santiment explained on Twitter.

Additionally, Bitcoin’s “Fear and Greed Index,” which “analyzes sentiment and emotions from different sources and compresses them into a simple number,” is currently almost completely neutral. This means that sentiment around Bitcoin can go either way: when fear is high, selling pressure on Bitcoin tends to drive prices down; when greed is higher, buying pressure drives prices up. For example, in August the index was in the “extreme greed” range, around 80, while Bitcoin was around $11,000. In March and April of this year, when “extreme fear” gripped global markets, Bitcoin’s price was relatively low.

Therefore, the current neutrality of the Fear and Greed Index suggests that things could go in either direction.

“Overall, the data suggests that buying pressure on Bitcoin is increasing.”

On the other hand, CoinDesk recently reported that on-chain analysis found that the number of “young investment” wallets (wallets that are one to three months old and rarely send Bitcoin transactions) on the Bitcoin network has risen to its highest level since February 2018. In fact, the number of young wallets has reached at least 2,254,667 this month, which is double the 1,162,632 young wallets six months ago.

(Young investment wallet trend chart, source: Finance Magnates)

Chainalysis economist Philip Gradwell told CoinDesk that the large number of new, young wallets appears to indicate bitcoin’s growing momentum: “It looks like new people are entering the market, buying bitcoin, and putting it into their wallets for long-term investment,” he said. “Overall, the data suggests that buying pressure on bitcoin is increasing and the supply of bitcoin available for purchase is decreasing as new purchases are likely to be locked up for the long term.”

A similar surge in the number of young wallets occurred in the second half of 2017, growing from 791,000 to 2 million. During the same period, the price of Bitcoin rose from $2,000 to $20,000.

Other cryptocurrencies are losing steam

However, with the exception of Bitcoin, the crypto markets appear to be cooling off a bit.

For example, the red-hot DeFi sector appears to be entering a long period of correction. For most of the summer, the project has been rising every week. Of the approximately 40 DeFi assets listed by crypto market data company Messari, only five have risen in the 30 days before press time: Cream, Uniswap, Hegic, Loopring, and Balancer. The rest of the assets are in the red.

The ongoing cooldown can be partially attributed to the SushiSwap incident that occurred earlier this month. At the time of the incident, Corey Caplan, partner at the DeFi Money Market Foundation, pointed out to Finance Magnates that while incidents of fraud in the DeFi space are less frequent, they can have a huge impact. “In any nascent space, the failure or success of a single entity can have a huge impact on the entire space,” he said. “That’s what happened with the SushiSwap mess, but I don’t think this incident should be viewed as a microcosm for the entire DeFi ecosystem.”

However, since DeFi is still young, there may be greater fluctuations in the future. (NetEase News)