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A positive shift in crypto-related news and a massive buying spree sent the price of Bitcoin soaring past $55,000 over the past week. This latest rally means our Bitcoin price prediction is within striking distance.
In just one week - from Sept. 29 to Oct. 6 - the No. 1 cryptocurrency surged more than 34%.
It's the highest Bitcoin has been since mid-May, though still well short of the all-time high of just under $65,000. The price has since stabilized around $54,000.
The sharp rally reversed a September decline that had dragged Bitcoin down to the $41,000-$42,000 range.
It also took many short sellers by surprise. More than $200 million worth of short positions were liquidated.
To be honest, practically no one saw this rally coming.
Over several days, multiple smaller triggers pushed the price past $50,000. Then one or more whales - deep-pocketed crypto investors - placed buy orders worth $1.6 billion over the span of just a few minutes. The Bitcoin price immediately shot up 4.5% for an increase of $2,400 per coin.
But that was just the capstone of the rally. Let's take a look at all the elements that were feeding the bullish momentum before the whales stepped in...
Anatomy of a Bitcoin Rally
Through much of September, Bitcoin was battered by a string of negative news - ranging from yet another Chinese ban on cryptocurrencies to rising criticism from U.S. regulators.
But that changed as the month drew to a close. While each development wasn't quite big enough to propel a rally on its own, together they had enough juice to reverse investor sentiment.
Here's what happened:
- Been There, Done That: While the mid-September China ban shook up the crypto markets, investors eventually realized it was actually the seventh time since 2014 that China had announced some sort of crackdown on cryptocurrencies. As concern over China faded, it became clear that Bitcoin traders had initially overreacted.
- Bitcoin ETF: In the first couple of days of October, speculation heightened that the U.S. Securities and Exchange Commission was on the verge of approving a Bitcoin exchange-traded fund. However, this would be a Bitcoin futures ETF, not the fully Bitcoin-backed ETF many crypto investors have been waiting for since 2014. Still, even a Bitcoin futures ETF would open the door for greater participation from retail investors.
- No Ban, Part One: During a Sept. 30 meeting of the House Financial Services Committee, U.S. Federal Reserve Chair Jerome Powell was asked whether he planned on taking a stance on cryptocurrencies similar to China's. "No intention to ban them," Powell responded. This came as a relief to the crypto community following a series of much more critical comments over the summer from other Fed officials, Treasury Secretary Janet Yellen, and SEC Chair Gary Gensler.
- Stamp of Approval: On Oct. 4, Bank of America launched research coverage of cryptocurrencies with a report called "Digital Assets Primer: Only the First Inning." The world of crypto is now "too large to ignore," the analysts wrote, adding "our view is that there could be more opportunity than skeptics expect." This move from one of the nation's top investment banks further bolstered Bitcoin's legitimacy as an asset class.
- No Ban, Part Two: On Oct. 5 - the day before the big whale buy - SEC Chair Gensler echoed Powell's statement in another House of Representatives hearing. Gensler said his agency also did not intend to follow China's lead, and that any ban on crypto would have to come from Congress. As with Powell's remarks, Gensler's words served to reassure the crypto community.
- The Big Money Wants In: On that same day, U.S. Bank, the fifth-largest bank in the country, said it had launched custodial services for Bitcoin. Just as important was the bank's reason for doing so: "Our fund and institutional custody clients have accelerated their plans to offer cryptocurrency and, in response, we made it a priority to accelerate our ability to offer custody services." The news was a reminder that institutional investors are moving off the sidelines and into crypto - an obviously bullish development.
It's easy to see how a crypto whale would view these events collectively as a buy signal.
So what does this "flash rally" mean for investors? And where does Bitcoin go from here?
Our Bitcoin Price Prediction for 2022 Is on Target
This rally is a reminder that Bitcoin often makes sharp, sudden moves. That volatility is why investors should avoid risky strategies when trading cryptocurrencies. You can get wiped out.
As noted above, this rally liquidated a lot of short positions - traders who were betting that the price of Bitcoin would fall. Likewise, the mini-crashes earlier this year clobbered people with leveraged positions in Bitcoin. The crash in May liquidated $6.5 billion worth of positions.
So don't be greedy or foolish. You can make money in crypto just by accumulating a position like you would a stock. Bitcoin investors call that "stacking sats" - a sat, or satoshi, being the smallest unit of Bitcoin.
This slow-and-steady strategy builds your position without leaving you vulnerable to Bitcoin's volatility. When the price drops, buy more. Just don't invest more than you can afford to lose. When the price goes up, you can think about a little profit-taking. Keep it simple.
Another point this rally has reinforced is that the despite all the volatility, the Bitcoin price trends up over time. Even at $55,000, you haven't "missed it."
As far back as January 2020, I predicted Bitcoin would reach $100,000 by the end of 2021. That lines up pretty well with current forecasts from crypto analysts. That would just about double your money in less than three months.
Of course, you can never be 100% certain of what Bitcoin (or any investment, for that matter) will do. But Bitcoin's momentum on Wall Street and within the larger investing community continues to pick up. And we know that no matter how much demand increases, the supply is fixed. That suggests the Bitcoin price will continue to rise for years to come.
In the short term, many expect Bitcoin to surge toward its all-time high of about $65,000. If that milestone is breached, Bitcoin is likely to rocket higher as we approach the end of the year.
"I think you'll easily go over $100,000, and then depending on how sharp the rally is, it's also likely to touch $200,000 or even go above that," Litecoin creator Bobby Lee told the Cointelegraph.
Bitcoin analyst PlanB, well-known in the Bitcoin circles for his "stock-to-flow" model of predicting Bitcoin prices, recently noted on Twitter that he had correctly forecast the closing Bitcoin price for August ($47,000) and September ($43,000). PlanB added his end-of-the-month targets for the rest of the year: October, $63,000; November, $98,000; December, $135,000.
Ternary Crypto Set Can Thirtyfold Your Money by Early 2022
At the start of the year, Michael Robinson introduced his readers to one of the largest market events of the 21st Century... the Digital Gold Rush.
His three-part crypto lineup has soared 1,000%+ since that day. Coin No. 1 has more than QUINTUPLED this year... Coin No. 2 can 20X your money by early 2022... and Coin No. 3 is trading for pennies.
With just one quarter remaining in the year - the time to jump is now.
Follow me on Twitter @DavidGZeiler and Money Morning on Twitter and Facebook.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.