Bitcoin has suddenly soared, surging toward $10,000 and returning the bitcoin market to its pre-coronavirus pandemic bull run.
The bitcoin price, up over 30% since the end of March, has almost erased its coronavirus crash losses—and is outperforming the U.S. S&P 500 index as well as most other major markets.
Bitcoin leaped higher on Wednesday morning, nudging $9,000 per bitcoin before falling back to trade around $8,800 on the Luxembourg-based Bitstamp bitcoin and cryptocurrency exchange.
“Bitcoin is now trading at a critical inflexion point, where significant Fibonacci retracements, 50-day moving averages and 10-day moving averages converge on the daily chart,” analysts at Singapore-based bitcoin index fund Stack wrote in a note, adding the turning of this resistance to support could see “further price action upside towards $9,300” but cautioned potential investors over “short-term headwinds.”
Bitcoin traders and investors are feeling upbeat as wider markets stage an incredible recovery despite most coronavirus-induced lockdowns still in place around the world.
U.S. stocks closed higher on Wednesday, adding to previous gains, as investor optimism over a potential coronavirus treatment grew, some lockdowns were eased, and Federal Reserve chairman Jerome Powell said he is willing to go further to prop up the economy ravaged by lockdowns.
“It may well be the case that the economy needs more support,” Powell said, speaking at a press conference after the Fed’s two-day policy meeting.
The Fed’s dovish stance has significantly boosted the bitcoin price, as well as most other assets, though crypto market watchers have pointed to strong underlying bitcoin sentiment for its outsized performance.
“The majority of investors in the market are bullish, with many having a long-term investment horizon unfazed by recent volatility. This overall sentiment could act as support for the bitcoin price over the next few weeks, though we aren’t entirely out of the woods yet,” said Rich Rosenblum, co-head of trading at algorithmic digital assets trader GSR, pointing to a “clearer path” back to economic normalization and “the impact of the economic stimulus” as driving “positive macro sentiment.”
The bitcoin price has recently outperformed most other assets, with bitcoin’s year-to-date returns surpassing gold, up around 25% and 12% respectively, since the beginning of the year.
Bitcoin’s rally has also eclipsed recent gains made by the S&P 500, which is down around 10% so far into 2020.
Meanwhile, the bitcoin market is gearing up for its looming supply squeeze, called a halving, set for May 12. Next month, the number of bitcoin rewarded to those that maintain the bitcoin network, known as miners, will be halved for the third time, dropping from 12.5 bitcoin per block to 6.25.
“The interest in cryptocurrencies is now building as investors look to the month end and forward to May and June. Many will have written off March as an extraordinary event and will base their forward thinking on trading through April. The reality is that cryptocurrencies have retained, or increased, value better than many other asset classes,” said Marcus Swanepoel, chief executive of London-based bitcoin and cryptocurrency exchange Luno.
However, other bitcoin and crypto investors have warned that traders should not celebrate a return to a bitcoin bull market just yet.
“We are seeing some enthusiasm around bitcoin as it breaks $8,000, but we are still watching closely and believe the sentiment is not yet bullish,” said Meltem Demirors, chief strategy officer at London-based digital asset manager CoinShares, warning over “conflicting outlooks” on what a broad economic recovery looks like.
“I expect bitcoin will see more trading activity around the halving—most likely ‘buy the rumor, sell the news’ and we’re seeing a lot of interest right now—our portfolio companies are reporting high volumes of inbound from firms looking to access bitcoin markets, but the volume is largely in derivatives.”