Yesterday, the price of Bitcoin briefly passed over $10,000–shooting up from roughly $9,700 to around $10,120 over the course of several hours, in the first stage of what turned out to be a nearly perfect ‘Bar pattern,’’
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As described by user ‘JamesRKaye’ in a post on Trading View, a Bart pattern is “characterized by its sudden rise in price, sideways movement, then sudden drop,” forming a line that resembles the hairline of Homer Simpson’s only son.
However, before the latter half of the pattern was formed, Bitcoin enthusiasts across Twitter started making their predictions that this time–surely this time–would be the end of Bitcoin below $10k forever.
“I don’t usually make predictions. But this is too obvious not to call. We will never see Bitcoin below $10k again,” wrote Twitter user @hodlonaut around 10.30 CEST on June 2nd.
I don’t usually make predictions.
But this is too obvious not to call.We will never see Bitcoin below $10k again.
— hodlonaut ⚡ (@hodlonaut) June 2, 2020
Collin Plume, chief executive and founder of Noble Gold Investments, told Finance Magnates that many investors still see Bitcoin as a place to make fast income, and as economic and political unrest continues, the need for ‘quick’ income increases: therefore, he believes that Investors’ short term interest in the currency causes the rapid increase and decline in its cost: “when you have something that can move so quickly and the return can be so high for a short period of time, people sell,” he said.
Regardless of whether the protests in America or elsewhere in the world are having any kind of direct effect on the price of BTC, Alex Mashinsky pointed out that the role that news plays in Bitcoin prices should not be underestimated.
Any news–good or bad–moves the whole market in an exaggerated way,” Mashinsky said. For example, in addition to the riots in America, “recently, coin movement in an old dormant BTC account spooked the longs.”
However, when it comes to BTC buying and selling behavior, the news may have a larger effect on institutional investors–and those concerned with the opinions of institutions: “a bad review from Goldman Sachs tanks the market, and [the entrance of] new fund managers like Paul Tudor Jones lifts it,” Mashinsky said.
$10k could be a “psychological barrier” for crypto investors
However, if the unrest in America was indeed the primary reason for the short push past $10k, why couldn’t Bitcoin sustain the move past $10k this time?
Collin Plume told Finance Magnates that in the greater scheme of things, one of the factors keeping BTC under $10k could have to do with investor psychology.
Indeed, “the $10,000 mark is a psychological barrier for crypto investors,” Plume told Finance Magnates.
The number 10,000 has also been observed as a psychological barrier in other financial markets as well.
Indeed, in an article for Business Insider, CNBC Senior Editor John Carney wrote of “The Curse Of Dow 10,000”. This phenomenon describes the way that from 1999-2003, every time the Dow seemed to have reached the 10,000 level, it would “succumb to a bear market and fall below it every time.”
While it’s possible that something about the way that ‘$10,000’–a “big round number”–looks on the page could be somehow intimidating to investors, the curse of 10,000 seems to have more to do with $10,000 being a marker at which BTC (and other financial markets) tend to have stalled out in the past.
“If the markets have in the past displayed a tendency to pull back at a certain level, rational investors can anticipate this and begin selling at that level,” Carney wrote.
Therefore, if $10,000 seems to be the place where BTC has stalled out before, then investors may plan to sell once $10,000 is reached in order to avoid a loss; this could be the reason that Bitcoin seems to dance around the 10,000-mark before falling back down.
Carney called these investors ‘psychological arbitrageurs’, or ‘Psych Arbs’: these traders “[reinforce] what otherwise might be an irrational market behavior, as the traders try to make money by betting that the market will gyrate when it hits key psychological points.”
What’s next?
Still, while the tendency to get stuck around $10,000 may be frustrating, Mashinsky argues that it could be good for the industry in the longer term: that every time BTC hits $10k, more traders and miners could enter into the Bitcoin ecosystem for the first time.
“When BTC spikes to recent highs (like $10,500) it gives a good entry point to shorts and mining guys who want to lock in gains,” he said.
Therefore, eventually, “we will break the $10k levels”–but this is only the first in a long line of upward movements.
“Then we need to get through $12k and $14k, which represent further resistance. After that, we are good to test new highs,” he said, adding that he believes that “it will come faster than anyone thinks, as violence and anarchy escalates with over 40 million Americans out of a job.”