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Despite last week’s steep drop, bitcoin looks on track to post its highest monthly close ever.
The number one cryptocurrency by market value dropped over $ 3,000 to $ 16,242 on November 26, eliminating excess leverage from the derivatives market. The decline was short-lived and prices recovered more than 50% of the decline in the following days.
As of press time, bitcoin is trading around $ 18,600 on major exchanges. It is significantly higher than the end-of-month peak price of around $ 13,880 observed on December 31, 2017.
According to some observers, the impending close of the record could be a harbinger of a stronger bull run. “Every time bitcoin closed above its previous monthly all-time high, an upward trend of 700% to 1000% followed,” crypto analyst Josh Rager tweeted at the beginning of the month. Market analyst Lark Davis shared a similar view on Monday.
Bitcoin jumped nearly 27% in April 2017, surpassing the previous monthly close record of around $ 1,150 reached in November 2013. What followed was a strong rally to nearly $ 20,000 by December 2017. Strong rallies were observed after bitcoin set record monthly closing prices in January and October 2013.
Does history repeat itself?
Analysts are optimistic about the longevity of the current bull market with some point to $ 36,000 as a level to watch once you climb the immediate psychological resistance to $ 20,000.
Factors considered to be responsible for the recent eight-week rally from $ 10,000 to $ 19,400, such as rising institutional holding, hedging demand due to the dollar sell off, a potential rise in inflation, and the search for yield along with a reserve global record negative-yielding debt should continue to fuel gains in the cryptocurrency.
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“People have been saying that institutions will be getting into crypto for years, but it looks like they already are this year,” cryptocurrency exchange EQUOS noted in its daily bitcoin analysis email. “There is a lot more to participate in, of course, and the amount of funds coupled with the immutable scarcity of bitcoin will be felt very strongly.”
According to JP Morgan analysts, further gains depend primarily on continued institutional participation. If flows in the Grayscale Bitcoin Trust decline, the cryptocurrency could suffer if momentum traders continue to retreat, analysts wrote in a November 27 note, adding that decreasing flows would weaken the argument that institutions are starting to prefer bitcoin to gold as a long-term one. forward investment. Grayscale is part of Digital Currency Group, the parent company of CoinDesk.
Bitcoin has outperformed gold by leaps and bounds this year. While the leading cryptocurrency rose 158% year-on-year, gold only rose 17%.
The two assets diverged this month, with bitcoin gaining over 30% and gold taking a 5.5% decline, the highest monthly decline since November 2016, according to data source TradingView.
Meanwhile, global stocks are on track to seal a record-breaking month on expectations that potential coronavirus vaccines would lead to a rapid global economic recovery next year. Bitcoin needs to make gains amid potential stock sales to solidify its appeal as digital gold.
Read also: Crypto Long & Short: how Bitcoin development is evolving and what’s behind it
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