Bitcoin is struggling to hold onto gains following a prolonged bout of selling, but at least one measure shows that a rally could be ahead.
Based on the DVAN Buying and Selling Pressure Gauge, Bitcoin jumped above a crucial level of resistance, triggering a positive divergence and a buy signal. A similar trend played out in January ahead of Bitcoin’s surge past US$10,000.
“The potential for downward moves remains in these next two weeks, depending on what new health and economic data shows. But the long-term case for crypto has been made stronger by the impacts of this pandemic,” said Richard Rosenblum, co-head of trading at crypto market-maker GSR. “As the dust settles, people will begin to look for a store of value.”
Bitcoin rose as much as 4.4 per cent to US$7,048 in New York on Friday, while the Bloomberg Galaxy Crypto Index, which tracks some of the largest digital assets, gained as much as four per cent.
Investors are rushing out of riskier assets amid the coronavirus pandemic that’s cast a shadow on global growth prospects, with Bitcoin losing about 25 per cent in March. That was its worst month since November 2018.
“Cryptocurrencies, especially Bitcoin, were supposed to offer a safe-haven against traditional assets and currencies,” said Nicholas Cawley, senior market analyst at DailyFX.com. “But they have failed, and badly.”
To Mike McGlone, an analyst at Bloomberg Intelligence, the shakeout will be a temporary drag. Considering that it came into existence just a little more than a decade ago, the token is faring relatively well, McGlone wrote in a report this week.
“This year marks a key test for Bitcoin’s transition toward a quasi-currency like gold, and we expect it to pass,” he said. “Unlike the stock-market reset but similar to gold’s, Bitcoin had its shakeout, stabilizing the foundation amid unprecedented global monetary stimulus and increasing adoption.”