After seeing Bitcoin trade at over $16,000, everybody is now asking, “How long will it last?”
Now its highest trade since January 2018, and up by over 120% from the beginning of the year, it is bullish, but it can change any minute. Since March, the price displayed the possibility of it dropping by double-digit percentages overnight, and with the way the market is going currently, a drop would be down to the macroeconomic market and not just the cryptocurrency market in isolation.
According to Chainalysis, Bitcoin’s rise and fall from the previous week were indicative of the impact of macro factors. Last Monday, after the news of the COVID-19 vaccine by Pfizer, Bitcoin’s price dropped from $15,000 to $15,000, a development that suggests that Bitcoin is a bet against indecision, and the more indecisive the bitcoin is, the more Bitcoin shall be held.
But since the vaccine news had been cooled down and pessimists came in, and so did uncertainty; and Bitcoin breaks $16,000. The report went on to suggest that until legitimate news on either a vaccine or a stimulus package to combat the economic complications is announced, Bitcoin and other assets would see a retreat.
“That prices have gone higher since suggests that financial markets need to see more progress on Covid before there is a retreat from safe-haven assets.”
Meanwhile, the on-chain indicators of the two largest cryptocurrencies, Bitcoin and Ethereum, have been supportive. Influxes into the exchanges in the past week have been increasing, signifying that people are taking profit at high prices. To balance the supply of BTC and ETH in the markets, trade intensity has also climbed.
Chainalysis measured the ‘trade intensity’ as orderbook trades to cryptos flowing into exchanges. The metric is also increasing, telling that there is enough buying power or demand for cryptocurrencies, even as the investors sell at prices over $16,000.
As of now, the balance is maintained as things stand; it can be a positive provided that the uncertainty mentioned is holding. Currently, Bitcoin is looking like digital gold, and it performs better than gold itself. Investors are venturing into the crypto-markets for they are unaware of what was going to happen to the traditional stocks if the economic slump continues and governments keep on reducing interest rates, bond yield will also decrease. Gold has risen too quickly to venture into again, therefore, the remaining asset is crypto, specifically, Bitcoin.
Meanwhile, the primary use-case for Bitcoin investment is the link to market uncertainty, what investors should watch out for is volatility, in every direction. The report concluded by stating,
“Price could keep climbing. The narrative, use cases, and market infrastructure have never been better for cryptocurrency… These conditions are a reduction in macroeconomic uncertainty, investors making sufficient gains given their portfolio, or if bitcoin stops looking like digital gold…Given this, investors should be thinking about volatility rather than just price appreciation.”
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