The Nasdaq, an index which primarily represents tech stocks like Amazon, Microsoft, and Alphabet, has surpassed 10,000 points to hit a new record high. The move above 10,000 effectively erased all the losses suffered from the coronavirus pandemic, yet, the price of Bitcoin (BTC) remains 50% down from its record high at $19,665.
Bitcoin was seemingly correlated with the U.S. stock market throughout March, but now the digital asset is seeing a decline in momentum following a 167% increase in price within three months.
The bullish trend and V-shaped recovery from U.S. markets also shows that the appetite for high-risk assets and single stocks is increasing. Bitcoin’s struggle to demonstrate a similar trend might be a hint that a pullback is due.
Nasdaq completes a V-shape recovery. Source: Tradingview
For Bitcoin it’s $10,500 or bust
The U.S. stock market has seen a strong uptrend due to the reopening of the economy, improving jobs market, and the increasing belief that the pandemic is beginning to taper off.
Bitcoin’s label as a store-of-value asset and its demonstrated ability to weather the current global macro challenges have made it a growing point of interest for Wall Street barrons and multi-billionaire investors in search of a hedge against inflation.
Currently cryptocurrencies are in an awkward position as retail investors are leading a FOMO-driven rally in the stock market while institutional investors look for safety from cash and bonds.
The source of demand for Bitcoin at the current time remains unclear. The stock market is generating large gains for retail investors and as such, stocks are being perceived as a more attractive asset class by retail investors.
Many investors are still waiting to see if Bitcoin will undergo a strong rally now that the block reward halving is over but currently, lackluster volume in both the spot and futures market shows an immense upsurge is unlikely.
Technically, the Bitcoin daily chart indicates that stability in the $9,100 to $9,300 range can build a strong foundation for a new rally in the short to medium-term.
“Still my primary scenario in which we have to hold $9,100-9,300. In that case, grind towards $10,500 can continue and the real pop occurs above, towards $11,600-11,900.”
BTC USD daily chart. Source: TradingView
Bitcoin price has been relatively stable above $9,300 throughout the past two weeks, suggesting that massive volatility is likely ahead.
Volatility expected to increase
Historical data shows that repeated rejections of a multi-year resistance level like $10,500 typically leads to a steep pullback, but after a halving the price tends to see a gradual grind upwards to test higher resistance levels over time.
The sentiment of cryptocurrency traders remains mixed, precisely because BTC is at a pivotal point that may decide its price trend throughout the year.
The key level most traders are closely observing is $10,500 and in a pure technical sense, a break out above this level would signal the start of a new bullish trend.