Bitcoin Quietly Rising From The Ashes: Where To Next?
Matthew Weller | Feb 12, 2020 02:57PM ET
For many traders, the recent parabolic surge in Tesla (NASDAQ:TSLA) evokes a euphoria reminiscent of that surrounding cryptoassets back in late 2017, when Bitcoin peaked near $20,000. As we all know, Bitcoin ultimately collapsed to trade at just $3,200 a year later. And while we wouldn’t expect that dramatic of a fall from Tesla, there’s a strong case for more downside if certain support levels are broken.
In any event, many traders who wrote off Bitcoin after its -85% drop may want to tune in again. The cryptocurrency has quietly risen from the ashes of despair to triple over the last 13 months. While the rally in price itself is certainly impressive, the most important word in that sentence may be “quietly.” Unlike the heady days in late 2017, when Bitcoin was a daily fixture in traders’ minds and financial media once it broke $10,000, relatively few market participants are even aware that the cryptocurrency has been rallying, much less obsessing over its day-to-day fluctuations.
Attention is notoriously hard to quantify, but using Google Trends search volume as a proxy, we can see that search interest in “bitcoin” was roughly 11 times higher at the peak in late December 2017. More to the point, search interest was already 7 times higher the first time Bitcoin broke above $10,000 in late November 2017:
Source: Google Trends, GAIN Capital
The relatively low level of retail interest in Bitcoin suggests that we’re nowhere near the mania levels that drove Bitcoin through $10,000 for the first time a little over two years ago. In other words, the formation of another similar bubble (a common occurrence in Bitcoin’s history to date) could lead to the cryptocurrency exceeding its previous record highs near $20,000.
While longer-term measures of sentiment remain subdued, the short-term price action suggests that Bitcoin’s rally may be due for a breather. Prices are approaching the highs from August, September and October of last year in the $10,500-$11,000 range, with the RSI indicator showing signs of stalling out in overbought territory.
Given this backdrop, short-term bears could consider sell opportunities below $11,000 for a potential retracement back toward $9,000 or the mid-$8000s. Meanwhile, longer-term bullish traders may want to hold off on new purchases near current levels and wait for a pullback to accumulate more Bitcoin in case we see another bubble form.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.