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What’s behind Bitcoin’s holiday price swings?

The holiday seasons have always been a particularly volatile period for cryptocurrency. Bitcoin tends to see a significant boost in prices just before a major holiday. For example, in 2017, Bitcoin was trading at the $6,000 mark just before Thanksgiving. What drives these excessive fluctuations and how can traders make sense of what is happening over the holiday period?



This picture show a bitcoin o top of other coins reflecting the bitcoin's holiday price.

Last week was marked by a weaker trend for crypto. Bitcoin lost about 5% and most altcoins faced similar problems. Individual outliers did demonstrate positive performance, such as Tezos and Cosmos. Many investors are hoping for a Christmas miracle to reverse the downward trend of the crypto market—but are they grasping at straws?

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Is the turnaround coming during the holidays?

If the price drops below the $7,000 mark, there is a risk that Bitcoin could continue to tumble below the typically strong $6,000 barrier. That would be an excellent entry-level for newcomers but would dismay many crypto investors.

While the stock markets are closed, the crypto markets are trading 24/7. Therefore, Bitcoin investors should at least keep an eye on the market during and between the holidays. Because of the above-mentioned trampoline effect occurs with a strong rebound at $6,000, there will also be very large price gains in the short term.

One might think that Bitcoin and company are already settling in for the holidays. But volatility can return very quickly. This is also supported by some technical indicators. Thus, the Bollinger bands of most cryptocurrencies have almost completely contracted recently due to the decreasing volatility.

This creates a kind of tension that can be unloaded in a violent price movement. Analysts believe that price jumps of more than 20% are possible in a market situation like the one we’re witnessing at the moment. The holiday season with reduced attention and lower volumes is even more vulnerable to this phenomenon. However, this cannot give any indication of the direction in which the price swings. In the short term, bearish indicators continue to predominate.

Contradictions from China

China continues to try to contain the crypto market, at least the parts it cannot directly control. Last week, the Weibo accounts of Binance co-founder Yi He and Tron founder Justin Sun were blocked. Weibo is the Chinese counterpart to Twitter. The contents of both sites are no longer available because they allegedly violated provisions of the Weibo Community Convention.

The Weibo pages of the Binance crypto exchange and the Tron Foundation were blocked a month ago. A new Weibo account created by Binance, on the other hand, is still active, as is that of Binance boss Zhao. The Weibo pages of other large crypto exchanges such as Huobi and OKEx are still working. On the other hand, the pilot project with the digital state currency is due to start in the city of Shenzhen at the end of the year.

Bitcoin’s capitulation concerns

The recent concerns about a possible capitulation of the Bitcoin miners due to low profitability have been relegated to the background with reports of new market offensives by the mining giant Bitmain. A lot of customers who buy a larger number of mining devices are lured with small down payments of $20 to $50 of the price. In addition, co-mining is to be promoted by renting equipment.

Finally, Bitmain is offering options to large customers to enable them to sell Bitcoin directly to Bitmain for $5,000. The measures were seen by some market observers as a positive sign for the Bitcoin price. However, this interpretation seems rather doubtful. It could well happen that a short-term pressure arises, from which Bitmain, in particular, could benefit. Bitmain is likely to be under a certain pressure to take action after the canceled IPO in the first half of the year.

New startup plans

Currently, a new startup for an IPO is planned. Canaan, the second-largest manufacturer, went public in November. However, the IPO was below original expectations. Nevertheless, the mining industry in China is being further strengthened and has recently been taken off a list of industries in China that may be banned.

According to a study by Coinshares, the share of Chinese Bitcoin miners has increased from 60 to 65% of global hash power in the past six months. This increasing concentration is often critically with a view to possible attacks. However, it is spread across a large number of mining pools. It would only be dangerous if a single actor had a share of over 50%. However, the largest Chinese mining pool (Poolin) only has a share of 17%.


(Featured image by TheDigitalArtist via Pixabay)

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Suzanne Mitchell juggles the busy life of a full-time mom and entrepreneur while also being a writer-at-large for several business publications. Her work mostly covers the financial sector, including traditional and alternative investing. She shares reports and analyses on the real estate, fintech and cryptocurrency markets. She also likes to write about the health and biotech industry, in particular its intersection with clean water and cannabis. It is one of her goals to always share things of interest to women who want to make their mark in the world.