Bitcoin rallies to $50,000 milestone but ‘psychological resistance’ could hold it back
Cryptocurrencies like Bitcoin are 'apolitical' says financial expert
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Bitcoin has forfeited its place atop the crypto market despite excess pressure from altcoins this year, but it has experienced its fair share of turbulence. The coin hit an annual low in late July when it dipped below $30,000 (£21,685.65) for the first time since the end of 2020. While it is now hovering around $50,000 (£36,142.75), the token still has hurdles to pass, among them “psychological resistance”.
What is psychological resistance?
Bitcoin has made an impressive rally in recent months, managing to gain more than $20,000 since July 21.
The token’s present value of $50,222.30 (£36,303.44) marks the first time it has ventured so high since May.
But it has stuttered to its new position, due in part to investors’ “psychological resistance”.
Bitcoin’s high price means it regularly hits new milestones, and slight drops often follow them.
The drop in prices can last months before the pattern breaks, and the token rises above them.
Experts believe the price reduction results from investors’ doubts about BTC’s intrinsic value.
They often believe new milestones are unjustified and sell, driving the price down.
But each time this happens, Bitcoin rallies again and passes the resistance point further down the line.
And analysts believe this is what is currently happening.
Daniela Hathorn, an analyst at dailyfx.com, said there was some psychological resistance last week.
While it is picking up again, she said resistance could pursue until the next milestone.
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She said: “As expected, Bitcoin saw some resistance at the psychological $50,000 mark last week, which led to a pullback towards $46,500 (£33,612.76), allowing new buyers a little bit of a breathing room.
“Momentum seems to be picking up once again, but there is likely to be some strong resistance up until $55,000 (£39,757.02) as sellers battle to keep their positions, so further sideways consolidation cannot be ruled out within this $5,000 (£3,614.27) gap.”
Ms Hathorn said investors would want to wait for the coin to exceed a less notable benchmark as a sign they are awaiting new psychological resistance.
She said: “A break above $52,700 (£38,094.46) would be a good sign that buyers are positioning themselves to tackle the next psychological resistance at $55,000.”
While bitcoin is booming, seasoned investors aren’t convinced the cryptocurrency market is worthwhile.
John Paulson, who famously bet against the US housing market before the 2008 crash, has warned people against investing in the volatile tokens.
Although he didn’t name any, he told Bloomberg TV they exist in a bubble that will “eventually prove to be worthless”.
He added he “wouldn’t recommend” people try their hand at cryptocurrency investment.
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