If you haven’t heard, bitcoin is back. The digital currency stormed higher on Sunday, trading to a 9-month high above $7,500, capping of a weekly gain of more than 20%.
Bitcoin’s resurgence has it on track to log four successive winning months — this after recording six losing months in a row, an unflattering record it had never previously achieved.
The bitcoin BTCUSD, +2.26% rally has now surpassed 100% from its cycle low in December 2018 and is up nearly 90% on the year.
So what’s behind the rally bitcoin? Here are four potential answers:
Technically driven
One thing the bitcoin rally has done is bust through some closely watched technical levels. Whether it’s the resistance at $4,000, the psychological $5,000 mark or some key momentum indicators, the technical outlook has flipped from lower highs to higher lows.
“Bitcoin’s long-term technical profiles continue to point to a new up cycle,” wrote chart watcher Rob Sluymer of Fundstrat Global Advisors.
“With bitcoin now back to a resistance band near $6,000 (it breach the resistance band late Friday), similar to where it was in Q2 2015, a pullback would not be surprising. However, rather than sell or attempt to micromanage bitcoin exposure, we would strongly encourage investors to remain focused on the longer-term bottoming profile developing,” he said.
Bitcoin, per Fundstrat Global Advisors
Moreover, bitcoin broke above the closely observed 200-day moving average, and on April 23, the digital asset scored a golden cross, where the 50-day moving average crosses above the 200-day moving average — underlining its upside momentum.
Read: Bitcoin rises from the ashes
The adoption argument
Arguably, bitcoin’s biggest battle is getting people to use it. Whether as a store of value or a medium of exchange, digital assets have struggled to garner attention, especially from institutional investors.
But, according to a recent Fidelity survey, this is slowly changing. The Boston-based asset manager said nearly half of institutional investors believe digital assets can play a role in their portfolio, while 22% already own some form of digital currency.
“We’ve been seeing steady growth and adoption in the industry, and prices are starting to get in line with the usage of bitcoin,” said Mati Greenspan, senior market analyst at eToro.
Read: More than 20% of institutional investors already own digital assets, Fidelity survey finds
Is sentiment shifting?
Bitcoin, for the first time in a while, is shrugging off bad news. The industry, which is prone to negative headlines, including exchange heists and malfunctions, or the use of cryptos for illicit activity, has been back in the headlines.
“The fact the Binance news was shrugged off was telling. Add in the Bitfinex debacle and you can see that the sentiment really is rising,” Greenspan added.
Binance, one of the largest cryptocurrency exchanges said on Tuesday that hackers stole more than $40 million worth of bitcoin. And on April 26, the New York Attorney General accused crypto exchange Bitfinex and Tether of an $850 million coverup.
But the digital currency barely flinched. After a momentary selloff, bitcoin resumed its march higher.
Read: More than $40 million in bitcoin stolen in hack of world’s biggest cryptocurrency exchange
Are people actually dropping gold?
Or maybe people are trading in a popular haven asset for a slice of digital currency.
On May 1, Grayscale Investments, a subsidiary of Digital Currency Group, kicked off a provocative ad campaign to promote bitcoin as a better alternative to gold. The campaign, which employed the social-media hashtag #DropGold, promoted bitcoin as a better store of value, arguing it’s more secure and borderless.
Read: Bitcoin tycoon Silbert kicks off ad campaign against ‘overpriced metal’ gold
And, it turns out the gold bugs were watching. A day after the campaign launched, the World Gold Council rolled out another explanation as to why cryptocurrencies are no substitute to gold. “Cryptocurrencies extreme daily and intraday volatility disrupts its use as a medium of exchange and discourages strategic investments,” wrote Adam Perlaky, manager of investment research at the World Gold Council.
But, maybe the ad got some investors reassessing their gold investments. On May 7, six days after the ad kicked off, the Grayscale Bitcoin Trust GBTC, +4.50% topped the list of the most actively traded stock on OTC Market Group.
Grayscale Bitcoin Trust (symbol: $GBTC) was the most actively traded stock on @OTCMarkets OTCQX today https://t.co/ZRzaeudjPx
— Barry Silbert (@barrysilbert) May 7, 2019
As always, there are myriad theories behind each and every bitcoin move, but after a torrid 18 months for bitcoin bulls, it doesn’t really matter why it’s up. And on Monday, bitcoin was continuing its run of wins, trading higher by 2% near $7,300.
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