Since Bitcoin has seen some rise in the end of previous year, and some fall recently in 2018. But there has been several evidence that Bitcoin managed to hold at a certain key price that is $6,000. Crypto market is really unpredictable as it reached at $20,000 only few months ago and experienced a steep fall from there recently.
There are three reasons why it manage to hold at one support level well, despite of unpredictable trading environment.
Reason one is historical trend in digital trading. Ben Marks, CEO and founder of Blocktrade Capital says, “. $6,000 represents a 70% decline from Bitcoin’s high of $20,000 in December 2017”. Average of the nine previous Bitcoin corrections that existed is 64% and if you only look at the corrections lasting longer than fifty days, the average retracement is 76%. Thus the 70% decline $6,000 represents is right in line with historical figures.
Second reason is psychology. Marks suggest that investors are helping digital currency to not to fall below $5,000. He says, “I believe that when the Bitcoin price dips below $6,000 and into the $5,000 range it triggers something in traders and developers that spurs them into action and gets them collaboratively doing whatever is necessary not to let the price fall below $5,000,”
Chris Kline, cofounder and COO of Bitcoin IRA, agrees.
“In my opinion, it’s not the $6,000 price that is critical. What’s critical is that Bitcoin remains stable within that price range. And it has: Bitcoin has held steady in the $6,000+ dollar range over the past few weeks.”
The third reason is technological. The cost of fundamentals which determine the intrinsic value of digital currency like the cost of resources that are being used and verify a crypto asset. Average cost of mining a Bitcoin is just under $5,000 – with highs exceeding $15,000 in some countries, and a low of just over $500 in Venezuela,” says Shidan Gouran, CEO and president of Global Blockchain Technologies. One of the reason it hasn’t dropped to hard cost just yet, is due to a combination of continued price speculation – and premium over the ‘spot’ price, which is common in the trade of commodities.
For example, says Gouran, retail purchasers of gold will often pay up to 5% more than its spot price.
“Of course, Bitcoin is much more volatile than gold, so it’s entirely plausible that the effects of speculation and spot price premiums can cause Bitcoin to have a value above its hard cost, bringing us to the $6,000 value that has been relatively consistent since June.”
Haye’s econometric model, explains this well. So far, Bitcoin’s current intrinsic value is $7608, not too far from the $6,000 key price. Still econometric estimates are subject to all sorts of theoretical and empirical limitations. That’s why we need to interpret these findings with extreme caution. As investing in crypto currencies is highly speculative and the market is largely unregulated as directed by SEC. Anyone considering to invest in digital coins should be ready for any loss.