The world’s leading cryptocurrency is trading around $7,700 and following this swift rally over the past week it is back against a key inflection point.
Yesterday, bitcoin climbed to a fresh multi-high and has recovered to pre-crash levels. Meanwhile, US oil prices are back to crashing amidst the excess supply of crude while no one wants it.
Equities market meanwhile are just about 16% off its all-time high but according to Bond King Jeffrey Gundlach, “we are not out of the woods. … I think a retest of the low is very plausible.”
He has shorted S&P 500 because “People don’t understand the magnitude of the social unease that’s going to happen. We’ve lost every single job that we created since the bottom in 2009.”
S&P 500 is surging despite the economy still being unstable and uncertain because “when those who are in charge of creating the money are buying, it’s kind of hard for prices to fall,” said analyst Mati Greenspan.
After the US Federal Reserve, now the Bank of Japan has ramped up its stimulus efforts with unlimited bond-buying to prevent its economy from a coronavirus-triggered collapse.
Now, this money printing means some of it could also make its way to the crypto market. This means we could very well “bust through the top and zoom toward the next point of resistance, possibly near $10,000,” wrote Greenspan in his daily newsletter Quantum Economics.
But it could also mean that “we’re now in a temporary bull trap, and we may test $7,000 to the downside again. In fact, this would be well within the current upward facing channel,” he added.
Amidst all this, the one-month bitcoin volatility has almost completely reversed to normal levels.
Usually, lower volatility causes investors to use more leverage but it is still at record low levels and after the March market crash there seems to be a longer-lasting change in trader behavior.
A 260-day volatility measure of Bitcoin’s 260-day volatility has also dropped to a record low compared to the S&P 500.
“Bitcoin volatility in decline is indicative of maturation and a consolidating bull market,” said Bloomberg Intelligence’s Mike McGlone. “The original cryptocurrency appears to have weathered the financial-market storm and is on sounder footing on the back of a price decline into good support with indications of increasing adoption.”
Meanwhile, in less than 14 days, come hell or high water, Bitcoin will go through its third reward halving.
According to Don Wyper, COO at DigitalMint, “some potential effects from the halving are likely not fully baked into the price of Bitcoin at this moment,” and he is expecting the BTC price to “skyrocket” based on past performance. But in the short term, while currently bitcoin is undervalued, increased volatility is expected.