Bitcoin: Is it a real comeback?

Bitcoin spiked to $7,143 on open, breaking the $7,000 barrier and reaching 8-month highs. Other cryptocurrencies saw a similar price action. This has been concomitant with a declines in global equity markets following frosty rhetoric from both US and Chinese officials.

Hence this again rekindles the believe that cryptocurrencies are being affected by the global equities. As stated in a past crypto-post: “ In general, cryptocurrencies tend to be affected by global equities performance but also react on major political and geopolitical events.”

However at this time of the year, the risk-off sentiment has been dominating in global markets, we have seen traders turning into cryptos. This brings back the question of whether digital currencies act as safe haven in a period of uncertainty.

Hence as the markets worry about a prolonged trade impasse while Germany is worrying about potential tariffs on its key auto sector, we have seen cryptocurrencies benefiting, as global stocks have dropped led by better than 1% declines in US futures and Chinese shares.

The leader of the cryptocurrency asset class, Bitcoin, recovered 2019 losses, while it has significantly gained more than 23.6% of the declines seen since record highs at the end of 2017.

However the overall rally for Bitcoin throughout 2019 has not only been driven by the risk-on risk off sentiment but also on the news regarding the interest that some big companies presented in February,  in using blockchain/cryptocurrency technology. Two of these companies are JPMorgan who announced the launch of a cryptocurrency for internal payments, while Facebook on the other side is working on a cryptocurrency-powered payment product as stated by Bloomberg.

According to Messari , Bitcoin’s reported 24Hr Volume reached $24 bln today, with the total volume of the cryptocurrency class (including Bitcoin) reaching $75.4 bln.

From the price action perspective, Bitcoin is moving higher so far, while it is currently set at the $7,385 area, just a breath below September’s peak. Hence as the price moves northwards above the 23.6% Fib. level, the key strong Support area seen during 2018, at $5,780-$6,000, is being reignited. The next immediate Resistance for the asset is set at October’s Resistance at $8,230 which is also the midpoint between 23.6% and 38.2% Fib. level and it could prove to be a strong barrier for the asset in the near future.

Nevertheless, even though the long term picture of the asset remains negative, the formation of the Bullish Rounding Bottom pattern, along with the improvement of momentum indicators, improves the medium term outlook. The weekly RSI climbed to 75, while MACD lines turn positive above signal line, suggesting the increase of the positive momentum. Hence a close today above $7,000 could confirm the Rounding bottom formation and the bullish outlook for the asset in the near future. A clear breach above the $8,230 Resistance as stated above, could open the doors towards 38.2% Fib. level, at$9,500.

 

Click here to access the Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.