There are currently two very different readings of Bitcoin’s price trajectory, depending on which sources you consult and the timeframe you use for analysis.
Investing always involves competing perspectives on an asset. In particular, fundamental analysis and technical analysis often provide distinct viewpoints, making prediction challenging. It’s important to consider how each approach influences the asset: technical analysis typically applies to the short term, while fundamental analysis tends to focus on a longer horizon.
Recent Bitcoin performance
On the positive side, the current volume-weighted average price (VWAP) of Bitcoin for 2020 is above $9,000. This figure exceeds the VWAP for prior years: 2017 and 2018 registered VWAPs of $6,125 and $7,657 respectively. Those numbers are well below today’s levels, so even if Bitcoin ended the year flat, it would still represent a substantial price increase compared with those earlier years.
Of course, most observers do not expect the price to remain flat. Analysts have been predicting a breakout for months, and with Bitcoin briefly surpassing the psychological $10,000 level a few weeks ago, that moment may be arriving. At the same time, other technical indicators now show resistance where there was previously support. In the short term, this could make the coming month a buying opportunity for prospective BTC buyers.
Could the novel coronavirus affect Bitcoin?
The novel coronavirus could have both positive and negative effects for Bitcoin investors. Several dynamics may influence the coin. First, the virus’s negative impact on China’s economy and global supply chains could disrupt Bitcoin mining, potentially putting downward pressure on BTC’s price. Conversely, market fear could drive investors toward cryptocurrencies as a perceived safe haven.
We are seeing an economic slowdown, and central banks are considering expanded liquidity measures to support economies for as long as necessary. Such monetary easing can weaken fiat currencies and redirect capital toward Bitcoin, an asset often viewed as having deflationary characteristics.
It is also possible that the coronavirus’s economic effects will have little or no impact on Bitcoin’s price. Another factor to keep in mind is the upcoming Bitcoin halving, which will have well-known implications for the cryptocurrency’s supply dynamics.