Is Bitcoin’s Recovery Just a Bear Market Rally?

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Global markets are recording gains this week.

Whether it’s Dow, S&P 500, gold, oil, or Bitcoin, everything is surging.

In March, the Dow Jones Industrial Average crashed 37% from highs in February having its worst first quarter ever. Similarly, the S&P 500 dumped 34% from its ATH to have its worst first quarter as coronavirus pandemic spread outside of its epicenter in China and on the back of liquidity crunch investors sold about everything they could.

Bitcoin price also plummeted about 63% from the 2020 high of $10,500 and even gold, the traditional safe haven asset, dropped 11.7% from its multi-year highs during this time.

Now, in April, Dow has surged 12%, the S&P 500 spiked 11%, oil recovered 40%, Bitcoin jumped 90%, and gold also recorded a 5% gain.

“V-shaped” Recovery or Bear Market Rally

But why are stocks recovering when the recession hasn’t started yet?

This could be because the healthcare crisis from coronavirus peaked fast enough as we saw in Italy, Spain, and New York that reported a decline in the number of new cases and deaths.

Fundstrat Global Advisors founder, Tom Lee said, “stocks over-reacted to pandemic.”

The Federal Reserve also moved fast enough to fend off the contraction while consumers are more resilient, all of which are behind the “V-shaped” recovery.

“We cannot ‘tell the market what to do’ and if stock recovers back to 2,793 (50% retrace), the market is telling us the crisis end is faster than expected,” said Lee.

However, not everyone thinks this is the end of the bear market. Nomura macro and quant strategist Masanari Takada said this rally is just a “bear squeeze” driven by panicked exits from shorts that were accumulated by investors during the downturn.

“It is best to assume that the rally is largely technically driven,” said Takada.

Now that bitcoin is still following the stock market, it is expected that the digital asset could take another drop too.

Mike Novogratz of Galaxy Digital, however, recommends buying hard asset gold and BTC because of the “money-printing orgy going on … at one point that comes home to roost.”

4 Bullish Bitcoin Charts

The world’s leading digital asset meanwhile has been trading above $7,000 since the beginning of this week. And just like the growing price, the number of addresses that are holding a small amount of BTC has been increasing since the sell-off.

Over the last 90 days, the number of addresses that are holding between 0.000000001% and 0.00000001% of total BTC supply, has increased by 6%. Also, those holding between one hundred millionth and one ten-millionth of supply also jumped 4%.

This jump in addresses means the adoption is growing and new users are buying the dip and accumulating small amounts of BTC.

Not Just small buyers but the number of whales is also increasing. This month, a total of 1,838 entities are holding over 1,000 BTC which hasn’t been seen since the market top in 2017.

Another bullish chart is that of the unmoved amount of Bitcoin. Now, over 21% of Bitcoin’s supply, 3.96 million BTC out of the 18.3 million circulating supply, hasn’t been moved in over five years.

Not just retail investors but institutional investors are also jumping into BTC as the trading activity on regulated exchanges has recently taken off.

After the price crash, spot volume saw a boost in their volume but not the likes of CME and Bakkt but as the price started making a recovery in April, “Trading activity at the CME seems to be increasing with open interest up 50% since the start of the month,” noted Skew Markets.

Bakkt’s trading activity also jumped, increasing 3x while open interest doubled. However, unlike Bitcoin futures, Bitcoin options haven’t started growing yet.

Moreover, “Large weekly expiry tomorrow with 11k bitcoin options dropping off.”

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