Bitcoin (BTC) was higher, following through on the upside after Wednesday’s 7.4% jump to a new 2020 high. It was the biggest single-day increase in almost three months.
The surge past $12,000, with prices now around $13,000, came after the consumer payments giant PayPal (PYPL) announced it would allow its 346 million customers to hold bitcoin and other cryptocurrencies, and to use the digital assets to shop at the 26 million merchants on its network.
“Traders are now eyeing for BTC to test the $14,000 long-term resistance from 2019, which we believe should be breached in the coming months ahead,” Lennard Neo, head of research for the cryptocurrency-focused structured-products firm Stack Funds, wrote early Thursday in a report.
In traditional markets, European indexes slid and U.S. stock futures pointed to a lower open as lawmakers in Washington failed to agree on a new economic stimulus package as data showed a rising number of coronavirus cases.
The official confirmation Wednesday that PayPal is pushing into cryptocurrencies (reported months ago by CoinDesk’s Ian Allison) ignited a fresh rally in prices for bitcoin, already seen as one of the world’s top-performing asset classes this year.
And it might be the fear of missing out, or FOMO, that now pushes bitcoin prices even higher.
“Big moves can trigger periods of pure FOMO,” Matt Blom, head of sales and trading for the publicly traded cryptocurrency financial firm Diginex, wrote Thursday. “Sophisticated traders are definitely aware of the opportunity.”
The FOMO instinct might be especially strong as the coronavirus-infected economy relegates Wall Street stock and bond traders to hoping for trillion-dollar stimulus packages just to keep asset prices from falling.
“Markets are pretty aggressively priced,” said George Pearkes, global macro strategist at Bespoke Investment Group, told Bloomberg News.
Bitcoin appears to get uplift from new stimulus announcements, since many cryptocurrency investors see it as a hedge against inflation. But digital assets also get the benefit of the doubt as a new technology that might revolutionize the financial industry, or as a form of payment that might find adoption from Argentina to Nigeria.
“This coalescing of fintech and bitcoin is yet another bullish development for investors,” Zac Prince, CEO of the crypto lender BlockFi, told CoinDesk in an email.
With just a couple months left in 2020, the largest cryptocurrency is on track to outperform – by far – pretty much every other major traditional asset class, from stocks to bonds to gold. It would be the second year in a row that’s happened.
Bitcoin prices, which doubled in 2019, are now up 80% so far this year. That compares with 6.3% for the Standard & Poor’s 500 Index of large U.S. stocks and a 27% increase for gold.
“It’s the sheer scale of PayPal’s reach that is attracting the headlines,” Jason Deane, an analyst for the foreign-exchange and cryptocurrency analysis firm Quantum Economics, wrote in a report. “This could well go down in history as a watershed moment, the point at which bitcoin goes properly mainstream.”
Such speculation might just be hype, sheer folly, a bubble mentality. Or it might be inevitable. Or all of the above.
Bitcoin’s price rally looks overdone, as per technical indicators. However, these metrics often trap investors on the wrong side of the market and are unreliable.
The cryptocurrency jumped to 15-month highs above $13,200 on Wednesday after online payments giant PayPal added support for bitcoin and other cryptocurrencies. At press time, bitcoin is trading near $13,000, representing a 20% gain for the month.
The 14-day relative strength index (RSI) is now hovering above 70, indicating overbought conditions. The RSIs on the 4-hour and hourly charts also show the price rally is overdone.
But other measures show that the latest price level might have staying power.
Data extracted from the Bitcoin blockchain show a surge in inflows to cryptocurrency exchanges, typically a sign that sellers are queuing up to sell. According to the blockchain intelligence firm Chainalysis received a total of 106,519 BTC on Wednesday, the highest daily inflow since Oct. 2.
Even so, prices are holding up, signaling there’s also a strong bid from interested buyers. It’s not unprecedented: A similar spike in inflows was observed Sept. 4, but the cryptocurrency rallied to 15-month highs.
All things considered, the price rally is likely to continue.
Read More: Above $13K: Bitcoin Unfazed by Profit Takers After Rise to 2020 High
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The latest on the economy and traditional finance
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