Bitcoin recaptured its $50,000 level on Sunday, thrilling market bulls with its rebound after its price plunged to less than $30,000 a month ago, losing half its market value following a record high run to almost $65,000 in mid-April.
Globally, cryptocurrency adoption among individual investors rose about 881 percent in the last year, according to blockchain data firm Chainalysis. The total crypto market cap broke above $2 trillion about a week ago.
Here are five things to know after bitcoin’s latest move above $50,000.
1. Overall bullish sentiment
On Saturday, Benzinga ran a Twitter poll asking whether people thought bitcoin would hit $50,000 over the weekend and 71 percent of respondents chose “yes,” indicating a bullish sentiment, Yahoo reported.
Market sentiment and security prices go hand in hand, so it’s crucial crypto investors keep an eye on sentiment indicators for bitcoin, according to Tom Lee, managing partner and head of research at Fundstrat Global Advisors. Rising sentiment in bitcoin has often correlated to strong forward six-month returns, whereas falling sentiment is a sign that heightened volatility may soon return, Lee said, according to Market Insider.
2. Bitcoin trading above 200-day moving average
Bitcoin crossed above its 200-day moving average earlier in August and is up more than 8 percent since then.
The 200-day simple moving average is represented as a line on charts and represents the average price over the past 200 days or 40 weeks. The moving average can give traders a sense of whether the trend is up or down, while also identifying potential support or resistance areas.
Every time bitcoin has crossed above its 200-day moving average, it has generated strong returns, with an average six-month forward return of 193 percent and a win ratio of 80 percent, according to Lee. “The 200 day moving average is important, because it reflects the long-term trend in prices and is also essentially where most holders acquired their security,” Lee said.
3. $50,00 was a major level of resistance
Before the weekend, CEX.IO crypto exchange executive director Konstantin Anissimov told Bloomberg that he predicted a possible frenzy if the $50,000 resistance zone was reached. “The next major resistance, for now, is at the $50,000 zone,” he said. “Should more buyers dive in to push the price above the $50,000 level, a frenzy may be ushered in to steer the price toward a medium-term target of $55,000.”
Conditions continue to favor the bulls, Daniel Joe reported for Cryptopotato.
“In addition to flipping $50k from resistance to support, the critical zone bitcoin needs to reclaim is $55-58k. This particular resistance zone has strong technical resistance,” Joe wrote. “With strengthening fundamentals, bullish price action, Bitcoin reclaiming the 21-week and 200-day moving average for the second weekly close, momentum flashing more mid- to long-term buy signals, and overall bullish on-chain metrics, the conditions continue to favor the bulls.”
4. Problems that caused bitcoin’s last collapse haven’t gone away
The problems behind Bitcoin’s recent collapse — China’s crypto crackdown, other regulatory pressures and environmental concerns — have not gone away at all, Barrons reported. However, sentiment has shifted fast, thanks in part to bullish tweets and support from high-profile backers including Tesla CEO Elon Musk and Twitter CEO Jack Dorsey plus the growing global adoption of bitcoin.
Recent good news for bitcoin included Securities and Exchange Commission Chairman Gary Gensler’s comments suggesting a potential pathway for Bitcoin ETFs under strict rules. On Sunday, PayPal launched its cryptocurrency service in the U.K., the first country outside the U.S.– “just the latest piece of good news boosting momentum,” Callum Keown reported for Barrons.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
5. The US is the future for bitcoin
The U.S. ranks fifth overall on the Bitcoin Market Potential Index and is the only major country in the top 10, Business Insider reported. The index is a composite indicator that ranks 178 countries with the most and least potential for bitcoin adoption based on technology penetration, international remittances, inflation, size of informal economy, financial repression, historical financial crises, and bitcoin penetration.
Given that the U.S. constitutes a bulk of global wealth, crypto adoption in the U.S. is the future of bitcoin over the next few years, according to Fundstrat’s Tom Lee.
Millennials are more open to crypto than baby boomers and those millennials will be coming into money in the next 20 years in the form of a massive wealth transfer from baby boomers, worth nearly $70 trillion. Some of this wealth transfer could flow into bitcoin, Lee predicted.