Bitcoin is short-term bearish, but a great long-term hold

Since January this year, bitcoin has been in bear territory, and many investors are wondering, will it ever go back to its December highs? Well to answer that question, one needs to understand why bitcoin and many other cryptos have been falling in the first place.

One of the reasons why bitcoin has been falling in the last two months is the increased frequency of exchange hacks. Between January and March, two companies, Coincheck and Bitgrail have been hacked.

Bearish cryptocurrency market

These two hacks sow doubt in the minds of new investors who began to question the security of the crypto market, and the result was a decline in trading volumes. Then there is the increased calls for regulation and taxation of cryptocurrencies.

The U.S has already announced that it would be treating cryptos as securities. This has pushed out many investors who feel that the tax implications of this rule are just not worth it.  These factors coupled with the increased number of altcoins that are faster and cheaper than bitcoin have played a role in hurting the price of bitcoin.

However, even with all these factors, the fundamental value of bitcoin is still strong.  For one, bitcoin has first mover advantage, which means that it already has a higher brand equity than the other cryptos. For instance, right now bitcoin is the gateway to the crypto market.

This alone gives it a strong intrinsic value. Even if another coin was to achieve flippenning, bitcoin is already so entrenched in the market that it would be impossible to dethrone it.  Then there is the fact that bitcoin is scarce. There are only 21 million bitcoins that can ever be mined. This makes it an excellent digital store of value, because it is scarce and deflationary.  On this basis, one can argue that the long-term potential of bitcoin from a fundamental perspective is up.

Bitcoin has been bearish since January
Bitcoin

From a technical perspective, bitcoin is likely to stay in bearish territory in the short-term. In the day chart, the price has broken below the $8500 support level, which indicates that there is strong selling pressure in the market right now. In the weekly chart, we can see a strong bearish engulfing candle, indicating that the bears have control of the market.

However, the $8000 price level is likely to offer strong support. But if this is broken, then we could easily test $5000 in the short-term. Volumes too are on the rise as the price falls, which is an indication of the strong selling pressure characterizing the bitcoin market right now.

The biggest short-term opportunity right now is to short bitcoin with $8000 as your exit target.  However, if you are looking to go long, then it would make sense to hold-on to fiat right now. It would be best to enter if the price can sustain above $8000. If it breaks that price, look for buying opportunity around the $7500 price level. It may not give you immediate returns, but you stand to gain big once the price rallies back to $10,000 and above.