Demeester says it’s not necessarily a bad thing for a correction to occur. He cited the Bitcoin trader Peter Brandt, who agrees that a price pullback could end up helping the cryptocurrency market grow at a more stable and sustainable rate.
“And as Peter Brandt argues, for this bull market to continue at a healthier pace we need for the FOMO to subside, which will likely happen via a violent correction.”
Demeester highlighted a weakening Chinese yuan as a force behind the recent surge. In fact, economic uncertainty around the world is a major force in driving up the price of Bitcoin according to Tuur Demeester.
“Capital controls, inflation, and capital flight have always proved to be significant medium-term drivers of the Bitcoin price, as early as the 2013 Cyprus banking crisis.”
And China has given us clear examples of this movement from yuan to BTC in the past.
“From winter 2015 to winter 2016 the yuan weakened by 10%, there was ample evidence of significant price premiums on Chinese bitcoin exchanges to validate that bitcoin was used by Chinese investors as a portfolio hedge or as a vehicle to move money out of the country”.
If the patterns follow the action from yuan to Bitcoin that the markets saw in 2015, we could have a huge retrace. However, as Demeester notes, the 70% correction was followed up by a two-month recovery to previous parabola highs.
While Demeester thinks it’s possible for correction of as much as 25% to happen in the short term, he also admits that Bitcoin could hit north of $11,000 in July. In other words, we should expect the Bitcoin roller coaster ride to continue.