Bitcoin [BTC], the world largest cryptocurrency, broke new records to surpass U$61,000 over the weekend. We examine some of that price action.
Over the weekend, bitcoin climbed as high as US$61,556, according to Coindesk, rising 22% over the past week.
Over the last year, bitcoin climbed more than 1,000% driven by a torrent of speculative interest as well as burgeoning institutional and corporate interest.
Bitcoin’s tipsy-turvy-ride looks set to continue as spirited discussions regarding the nature and outlook for bitcoin persist.
Bitcoin and the US stimulus package
Over the weekend, I wondered how the mammoth $1.9 trillion US stimulus package would impact the market.
How would stimulus cheque recipients respond and will any asset class or security benefit?
Well, as Bloomberg reported yesterday, the U$61,000 breach was attributed in part to ‘bets that some of the pandemic relief payments in the U.S. will end up chasing the digital token’s towering rally.’
According to Pepperstone Group’s Head of Research Chris Weston, cryptocurrencies in general, not just bitcoin, have experienced ‘some good flow, with traders front running U.S. stimulus checks.’
Where to from here for bitcoin price?
It is difficult to see exactly where bitcoin and its price go from here.
Many ‘deaths’ have been pronounced only for bitcoin’s price to rally.
However, with bitcoin scaling back from its all-time record over the weekend, investors may well be contemplating the feasibility of bitcoin’s recent trajectory.
Weston pointed out in a note that bitcoin would need to stay above the previous high of just over US$58,000 to persuade investors of a ‘new bull leg.’
Other analysts like Miller Tabak + Co’s Matt Maley think that bitcoin could rally as high as U$75,000 ‘very quickly’ based on some chart patterns, according to Bloomberg.
One thing bitcoin bulls may point to is the emergence of institutional players and the impact these may have on the crypto.
For instance, the likes of Tesla, MicroStrategy, PayPal, and Square have become involved with BTC in a big way.
As a Bloomberg article pointed out, the correlation coefficient between bitcoin and an equal-weighted basket of five stocks, which have proclaimed investments in the crypto — including Tesla and Square — has ‘surged to an average of 0.72 this year from 0.26 in 2020.’
As bitcoin’s weekend surge demonstrates, the crypto market is heating up once more and the next few months will be vital in shaping up investor sentiment.
If you’re uncertain how to assess the recent crypto rallies or are wondering if other asset classes like gold are a better investing option right now, then you should definitely read this free report here.
Our expert will reveal how the gold and bitcoin assets stack up against each other as investments in 2021.
For Money Morning
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