First Mover: Bitcoin’s latest rally proved irresistible as bitwise assets exceed $ 100 million

Bitcoin was lower, disrupting a powerful rally that saw the largest cryptocurrency jump 25% in October to its highest levels since June 2019. Traditional financial media like Bloomberg News wrote about it.

Prices appear to have reached resistance just below $ 13,900, close to last year’s high. But analysts said that if the level is breached, there appear to be few brake points before the 11-year cryptocurrency rises to $ 14,000 or higher.

“Between the $ 14,000 and $ 20,000 levels, there is not enough price data to pinpoint specific resistance points,” Mati Greenspan, founder of foreign exchange and cryptocurrency research firm Quantum Economics, told subscribers in a newsletter.

In traditional markets, European equities fell to a five-month low and U.S. stock futures were down amid investor concerns over rising coronavirus cases. Gold weakened 0.4% to $ 1,900 an ounce.

Bitcoin’s recent rally with struggling US equities simply widened the cryptocurrency’s outperformance versus traditional markets. As more investors tune in, the expanding gap could become a self-sustaining trend.

After Tuesday’s price hike to a new 2020 high around $ 13,700, bitcoin has now risen 90% for the year to date. This puts the cryptocurrency on track to surpass last year’s 94% gain.

It is also far ahead of the Standard & Poor’s 500 index of large US stocks, where a recent decline has reduced earnings year-to-date to just 5%, after a 27% increase in 2019.

Many large institutional investors, such as pension funds, are under pressure to hit 7% annual return targets and, with stocks now faltering and bond yields near historic lows, are looking for alternatives. Bitcoin’s track record alone might be enough for a sale, but the 11-year-old cryptocurrency also represents what could be the bridgehead of a brand-new and cutting-edge financial system: digital binaries, such as the cryptocurrency ecosystem is described by some industry executives.

Then there’s the theory among many investors that bitcoin’s fixed supply makes it a useful hedge against central bank money printing – yet another compelling narrative at a time when leading authorities from the Federal Reserve the European Central Bank and the International Monetary Fund say it is necessary to prevent the global economy from faltering. As highlighted in this column earlier this week, analysts at JPMorgan Chase, the once-criticized largest US bank, are also now discussing bitcoin’s upside potential.

“Every major institution is reviewing it right now,” Matt Hougan, chief investment officer of cryptocurrency-focused money management firm Bitwise, told CoinDesk in a telephone interview. “There are a lot of pings in my LinkedIn inbox.” The San Francisco-based firm announced Wednesday that its assets under management recently exceeded over $ 100 million for the first time.

According to Hougan, there are some key differences from previous bitcoin bull runs, such as in 2017 when the cryptocurrency price soared to around $ 20,000.

There has been a rapid explosion in the industry’s support infrastructure, from the development of regulated asset custodians to more reliable price feeds and most recently the move by US officials to explicitly authorize banks to provide services to cryptocurrency companies. PayPal’s move last week to allow users to buy bitcoin offers a new seal of approval from an established company along with an incentive for other large financial companies to follow suit, in order to avoid falling behind.

Notably, Bitwise has repeatedly failed in its years of efforts to gain approval for a bitcoin exchange fund. But Hougan said his firm has found a growing and welcoming picture of financial advisors looking to direct money into its cryptocurrency investment funds, as they are among the few businesses that have a major positive impact in 2020 on client portfolios. .

“We are reaping the rewards of two years of building infrastructure in this space,” Hougan said. “Unsurprisingly, we are reaching multi-year highs.”

Digital asset traders are so familiar with bitcoin’s infamous price swings that such optimism can sometimes seem slavish, breathless, gullible. But right now it’s not just cryptocurrency managers who are selling the story; bitcoin is getting a credibility shot from its market performance.

Bitcoin decoupled from stocks this week. Prices narrowly missed the June 20019 high of $ 13,880 early Wednesday and was last seen at $ 13,550.

The minor pullback could be attributed to overbought conditions signaled by the reading above 70 on the 14-day relative strength index (RSI). The 14-week RSI also crossed 70.

An overbought reading does not imply a bearish reversal. That said, it often produces temporary consolidation or shrinkage similar to that seen in May and July.

The dips, however, could end up reloading the bulls engine for a stronger rally, such as fundamental indicators like the Z-Score from Market Value to Realized Value (MVRV), which measures the deviation of market value from realized value to gauge undervalued and overrated conditions. Right now the indicator suggests that bitcoin is far from overvalued and has plenty of room to extend the strong $ 3,867 to $ 13,800 rally over the past 7.5 months.

The MVRV Z-Score, currently at 2.12, is hitting a two-year high, according to data source Glassnode. It is still well below the 7.0 score where an asset is considered close to the maximum.

All in all, the path of least resistance for bitcoin remains on the upper side and larger gains seem likely, albeit after a minor consolidation.

Read More: Is Bitcoin Rally Excessive? This key indicator says no

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