The world’s largest cryptocurrency is trading at $9,380 after surging to $9,429 level yesterday. These gains started flowing in during the weekend on the back of high volume that went above $1 billion.
In the futures market, Bitcoin contracts on the CME Group topped at about $800 million, higher than they have been in a while. ICE’s Bakkt that makes physical delivery recorded $11 million for the day, higher than the average.
Highest January in Six Years
On Tuesday, Bitcoin closed its 3rd consecutive over 3% return day that has been the 2nd time that returns increased each day for 3 days. And for the first time since 2014, January gains are looking good, up 27.54% to date in 2020.
It was January of 2011 that Bitcoin recorded the highest percentage of gains of 75%, followed by 51% in 2013. Now, the third-highest January returns are being seen this year.
Except for 2017, in 2015, 2016, 2018, and 2019 Bitcoin recorded negative returns.
“BTC’s January return hasn’t been above the median monthly return for 5 straight years. 2020 is looking to buck the trend (or we’re just in for a wild 2020),” noted Analyst Ceteris Paribus.
Bitcoin Pulverize Downward Channel and 200 DMA
While Bitcoin is still enjoying nearly 4% gains, BitMEX CEO Arthur Hayes believes the top is near as he said, “Futures basis at local highs. Spot is creeping up. The blow off top seems nigh.”
However, Mati Greenspan, founder of Quantum Economics says, “it doesn’t get much more bullish than this,” because bitcoin has “completely pulverized” the downward-facing channel and the 200 Day Moving Average.
Acknowledging the several false breakouts, Greenspan concedes that this could be one too, but feels it’s a lot less likely this time because “this move has happened more gradually, allowing the market to really give a proper timely test of the relevant price levels,” unlike the one seen in late-October driven by Chinese President XI Jinping embracing blockchain technology.
Greenspan explains how when a large move is widely anticipated by the market, the market takes its time. But when the technical breakout eventually happens, the market feels a moment of shock and disbelief.
Fed and Halving Propelling it Forward
However, a deterioration in the correlation between the price volatility and transactions on Bitcoin blockchain has been found. While the main chain has been recording “very consistent volumes” since the starting of 2020 by staying well within the $500-$2 billion range, it has been lately getting narrowed.
“Those who are trading actively on bitcoin, no matter what venue, are likely not settling their transactions back to an actual wallet. Therefore, we can probably conclude that a lower percentage of on-chain transactions can be attributed to short term speculation,” said Greenspan.
Interestingly, there are about 100 days left in the much-anticipated halving event. People are excited about it and this Greenspan, former analyst at eToro said is one of the “strongest divers from a fundamental perspective.” “Fed continuing to push money into the markets,” is another strong driver, he said.
Becoming a Safe Haven
Unlike Greenspan, Fundstrat Research’s Tom Lee believes these gains are the result of Bitcoin being seen as a safe haven.
“Bitcoin is best performing asset class YTD +26%… demand for “safe haven” is boosting Bitcoin and arguably, Bitcoin is seen as a better “safe haven” than gold,” said Lee.
Bitcoin bull points out how the digital asset was the best performing asset of 2019 while the traditional safe haven asset gold was up 18.3%. This trend is continuing in 2020 as the precious metal is up only a decent 3% in comparison to BTC’s 27%.
According to Greenspan, Bitcoin isn’t quite there just yet but says “there are clear indications that it’s at least moving in this direction.”
Analyst Paribus also disagrees with Lee as he points out that BTC is “outperforming in a risk on environment,” which doesn’t mean investors see the digital asset as a better safe haven than the bullion.
After all, “Investors choose to store about $7T in gold and $0.17T in bitcoin.”