It is currently trading at around $9,300 (£7,200), having dropped below $7,500 last week amid questions over Facebook’s Libra cryptocurrency project and reports that quantum computers could pose a threat to bitcoin. This dip was shortly followed by a major price surge that saw bitcoin briefly reach above $10,000 over the weekend.
Despite the price turmoil over the last week bitcoin has managed to avoid the so-called Death Cross – a market pattern that takes place when the 50-day moving average falls below the 200-day moving average.
Prominent cryptocurrency analyst Nigel Green, who is the chief executive of the deVere Group financial advisory firm, believes bitcoin will experience more gains and hit $12,000 before the end of the year – so long as it is able to stay above the key support level of $8,500 this week.
“Bitcoin has registered some impressive gains over the last 48 hours after being in a lull period in recent weeks,” Mr Green told The Independent. “The $8,500 support has previously acted as a crucial support for bitcoin. I believe that if bitcoin traders can keep the price above this over the next week, the world’s dominant cryptocurrency will experience a breakout.”
Other market analysts claim that geopolitical issues – such as Brexit and the escalating trade war between the US and China – could see investors turn to bitcoin and other cryptocurrencies due to uncertainty in traditional markets.
The recent gains could also serve to prompt even more investment, as traders seek to make a quick profit from bitcoin’s sudden good fortune.
“After the quick push higher there will be profit taking today but the overall change in sentiment is very positive,” said Marcus Swanepoel, CEO of cryptocurrency firm Luno, who added that there did not appear to be one answer as to why bitcoin experienced such huge gains.
Some attributed bitcoin’s latest price rise to comments reportedly made by Chinese leader President Xi Jinping. Speaking at the Political Bureau of the Central Committee last week, President Xi described bitcoin’s underlying blockchain technology as an “important breakthrough” and said more should be done to encourage its development.
He added that China should “seize the opportunity” offered by blockchain technology and accelerate its development.
His comments add weight to rumours that China is developing its own cryptocurrency, which is expected to be revealed early next year. A recent report published by digital exchange Binance suggests that its launch could have a significant impact on the traditional financial sector by eliminating the need for bank accounts.