NEW YORK: Bitcoin’s stealth rally over the past two weeks not only pushed it past a key level of US$45,000 (RM189,405) – it also put the world’s biggest cryptocurrency back in positive territory for the year.
The cryptocurrency – up more than 15% since March 11 – traded at about US$46,600 (RM196,139), beyond the upper end of what had been a narrow US$35,000-to-US$45,000 (RM147,315 to RM189,405) range since early this year.
With the fresh gains, the coin is now up about 0.6% for the year.
If bitcoin can keep breaking through “in a meaningful way,” it should gain a lot of upside momentum, said Matt Maley, chief market strategist at Miller Tabak + Co.
The coin has been stuck in a tight path as the Federal Reserve and other central banks remove some of the stimulus measures they put in place in response to the pandemic downturn.
That means there’s less cash to go toward riskier assets, including crypto. In addition, digital currencies came under scrutiny with speculation swirling that they could be used to skirt Russian sanctions, though many analysts rebuff that claim.
Still, bitcoin rallied this month alongside broader increases in United States stocks.
“As we test the top of the 2022 trading range for the fifth time, this is another one of these bitcoin moments when the narrative could swiftly change and investors pile in, propelling the bitcoin price higher,” said Antoni Trenchev, co-founder and managing partner at Nexo.
“It might just be time to awaken from the bitcoin-sideways slumber that’s been 2022.”
Though crypto assets under management grew in March, aggregate trading volumes fell 30% to US$259mil (RM1.09bil), the fifth consecutive month that they failed to break this downward trend, according to a report from CryptoCompare.
Bitcoin was well above its 50-day moving average, which currently sits around US$41,085 (RM172,927).
That puts it around the 80th to 90th percentile and in the “overbought” range, according to Bespoke Investment Group.
But, though that signals potential for a downturn in price for many assets, with bitcoin it’s historically been the opposite, the firm said.
“When it has been similarly overbought in its past (over the last five years), it has averaged significant gains going out one to 12 months,” according to the Bespoke report.
When bitcoin has been in the ninth decile of its spread versus its 50-day average, it’s historically risen 16% in the next month, is up 100% six months later, and has gained 274% after a year, according to data compiled by Bespoke.
“This isn’t normally what you see for the typical stock or exchange-traded fund, but because bitcoin has mostly traded higher over the years and really has a lot of momentum trading behind it, overbought levels have yet to become a headwind for this particular space,” Bespoke wrote.
David Duong, head of institutional research at Coinbase Global Inc, pointed out that over the past eight weeks, cryptos have seen shallower drawdowns than US stocks have.
Equities, for instance, saw a two-standard-deviation drop on three different occasions over the last several weeks, while bitcoin notched a one-standard-deviation decline.
“This decoupling is important in our view, because it suggests that crypto returns can exhibit less relative volatility compared to other risk assets amid some of the most challenging market conditions we have faced in recent history,”
Duong wrote in a note. “This could potentially support an argument for greater (relative) crypto stability in the short term.” — Bloomberg
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