Bitcoin bounced after Sunday’s steep declines, which had seen the cryptocurrency logging its worst daily performance since September 2019.
The bitcoin-to-dollar exchange rate on Tuesday jumped 2.21 percent to establish a new intraday high at circa $8,094. The pair’s rebound, which appeared almost like a “dead cat bounce,” raised hopes for extended bull trend, with prominent derivative trader Tyler D Coates citing a historical support trendline for helping bitcoin turnaround.
“Bitcoin is testing the adoption curve trendline for the seventh time since 2013,” tweeted Coates with a chart illustrating the downside rejection.
Bitcoin bounces after testing a long-term support trendline | Source: Tyler D Coates
Stock-to-Flow Support
The so-called demand area is a part of PlanB’s popular Stock-to-Flow model, a price prediction tool that imagines the bitcoin price at $100,000 in the near future. The analyst had also rejected bitcoin’s 9 percent crash as an irrelevant event, stating that it is still on track to hit a six-figure valuation.
An uptrend is also visible in the bitcoin’s options market. As its spot price rebounded, the cryptocurrency’s options contracts across multiple exchanges also hit record volumes, with nearly $200 million worth of bets placed. The rise in options trading activity near what Mr. Coates termed as “adoption curve trendline” also served as a bullish case for bitcoin.
BTC Options Volume | Source: Skew
Cash Outpaces Safe-havens
Experts noted that it is difficult to gauge the extent to which the virus could hurt the global financial market. Such uncertainty is prompting investors to dump their risk-on assets for lower-risk safe-havens. Prominent portfolio manager Altaf Kassam, for instance, told WSJ than his fund sold stocks and moved into cash as a measure of protection against market volatility.
Global stock markets tumbled and government bonds rallied as the coronavirus stoked fears of a prolonged economic slowdown reut.rs/3cDnNjZ
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Interestingly, investors are not keen to treat bitcoin as a safe-haven, an offbeat asset that is more volatile on a normal day than stock markets are on a difficult day. Instead, they are using the cryptocurrency’s overall yearly gains to cover margin calls amid plummeting equities and energy markets.
That leaves bitcoin in a catch-22 situation as the Coronavirus epidemic digs further into the investors’ consciousness. They would like to make distance from a volatile asset in times of global uncertainty. Instead, their go-to choice would be long-term government bonds.
The next big price rally for bitcoin could come when government bonds start yielding negative returns.
Yashu Gola
Yashu Gola is a Mumbai-based finance journalist. He is profoundly active in the bitcoin space since 2014 – and has contributed to several cryptocurrency media outlets, including NewsBTC, FxDailyReport, Bitcoinist, and CCN...
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