Bitcoin Resurgence Leads Digital Asset Growth
Carl Cotton | May 06, 2019 07:21AM ET
It wasn’t long ago that many analysts had effectively written off bitcoin, but now bitcoin is back in big way. 2018 can only be described as being a brutal year for bitcoin with in excess of $500 million being wiped from crypto-currencies. Now, something has changed, the bitcoin turnaround may have begun with a spike at the start of April but it has turned into a pronounced upward trend for cryptocurrencies.
Earlier this month the digital currency had pushed through the $5500 barrier and was trading at five-month high and it is still riding high today with a bullish indicator suggesting that greater gains are not far away.
As the research analyst Lukman Otumuga wrote at the start of April:
The technical picture for [bitcoin] is looking increasingly bullish on the daily charts with the fabled bullish ‘golden cross’ slowly coming into play.
The golden cross was achieved this week when the 50-day moving average demonstrated sufficient momentum to cross above the longer 200-day moving average. The 50-day moving average reached $4,489 while the 200-day average was only $4,478. These figures are 70% higher than the cycle-low the digital currency experienced in December. and 50% higher than at the start of 2019.
Overall traders are now increasingly bullish about the prospects for bitcoin with more than 80% of retail traders being long net-long bitcoin. While some investors closely follow every rise and fall of the digital currency others such as Anthony Pompliano a founder at Morgan Creek Digital caution that it is better to focus on the “underlying fundamentals of the transaction settlement network” Pompliano reminds investors that there is a continued growth in the number of transactions occurring on the bitcoin blockchain and says that:
Those that have the patience and discipline to stick around will be rewarded handsomely.
For the last four months bitcoin has experienced a tight trading range in the area of 3300-4100 now things have changed. So, what caused the sudden turn-around in the fortunes of bitcoin, that saw it reach a 20%-plus spike and start trading at levels not seen since November 2018?
Some traders will point to algorithmic hedge funds as the leading force behind the bitcoin surge with Reuters reporting that an algorithm spread an order worth $100M across multiple major exchanges and triggered the rally.
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Others will speak about ‘mining reward halving’ an established protocol which reduces new issuance of coins after a fixed amount of blocks have been processed.
Still others will mention increasing levels of activity in digital wallets in the few weeks preceding the spikes. The truth is that there doesn’t seem to be any single factor to which investors can point, but that doesn’t seem to bother cryptocurrency investors, they are still delighted to enjoy the surge and hope there is more to come from the technical uptrend.
It’s true that bitcoin may now experience a temporary pullback to around $4,700 yet the longer-term outlook remains bullish for as long as BTC is able to continue higher than the established resistance range of $4,100 - $4,200.
If one thing is clear in this situation it is that it is that it’s not just bitcoin that is rising. There is increased stability in the crypto-currency market generally with rival currencies XRP and Ether both advancing. Early April trading saw the total market cap covering all crypto-currencies increasing by 17%.
It is not just crypto-currencies but also crypto-related stocks that are enjoying renewed growth. Around the world the Bloomberg Galaxy Crypto Index has gained significantly in recent days. While crypto-related stocks such as Riot Blockchain, Inc, Marathon Patent Group, HIVE Blockchain Technologies, and others are all heading upwards. Even companies such as Goldman Sachs (NYSE:GS) and NVDIA, which have crypto involvement, while being focused elsewhere are seeing growth.
This recent growth in digital assets has co-incided with new-found global confidence in cryptocurrencies as a whole. According to a new poll by bitFlyer Europe the majority of Europeans see a long-term future for cryptocurrencies, believing that they will still be around in ten years.
Commenting on the survey results the bitFlyer COO said:
These results indicate that the reputation of cryptocurrency has moved beyond hype and become more established. It’s very easy to forget just how new cryptocurrencies still are; we’ve only just celebrated bitcoin’s 10th birthday, so for the majority of consumers to believe in crypto’s future is without a doubt an achievement.
With the advent of apps such as Bitcoin Revolution that allow users to auto trade bitcoins the popularity of the cryptocurrency is set to grow. As Anthony Pompliano of Morgan Creek Capital has reminded us:
[Bitcoin is] the best performing asset class in the last ten years. It’s outperformed S&P 500, Dow, Nasdaq, et cetera, during the longest bull run.
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