Bitcoin’s Overall Trend is Downwards Until Proven Otherwise
Yesterday, the price of bitcoin went from about $8,800 to $9,300.
A jump of about 5% came on the day the Goldman Sachs Group discussed the state of the economy along with gold and bitcoin which turned out to be a disappointment for the crypto community.
Bitcoin market cap > Goldman Sachs market cap
— Barry Silbert (@barrysilbert) May 27, 2020
While blasting the world’s leading cryptocurrency, Goldman said, they do not recommend bitcoin for its clients' investment portfolios “even though its volatility might lend itself to momentum oriented traders.”
The report compared Bitcoin’s rally to one of the most infamous instances of speculative bubbles, the Tulip mania of the 1600s in the Netherlands.
According to the investment bank, bitcoin is not an asset class — they do not generate cash flow or earnings or provide consistent diversification benefits. Moreover, there is no evidence they are an inflation hedge, the report said.
Although its high volatility may appeal to hedge funds, it doesn't make bitcoin a viable investment rationale.
“Goldman Sachs served a cold dish to the crypto community, which was largely expecting them to come out with a bullish call on the world’s number one digital asset,” analyst Mati Greenspan wrote in a note. “Perhaps Goldman is just trying to jawbone Bitcoin to buy more for themselves at a cheaper price. Who knows?”
Goldman Sachs loves Bitcoin so much that they tell their clients to not buy it, so they can buy more, which includes their investment in Circle.
— Willy Woo (@woonomic) May 28, 2020
Also, it’s quite clear that institutional interest has been picking up lately with open interest at the CME through the roof, and volume at Deribit, which mainly focuses on institutional clients in Europe, has been growing steadily.
A healthy pullback might be needed
While bitcoin’s price is continuing its upward momentum from yesterday and making its way to $9,400, the flagship cryptocurrency seems to be stuck in a funk.
Bitcoin needs to break out the downtrend formed after the high put in May failed to take out the one set in February. If bitcoin rallies continue to wither before they overcome the previous high, it would signal that bitcoin has entered a potential downtrend.
“The overall trend is down until proven otherwise,” said crypto trader and investor Josh Rager.
— TraderSZ (@trader1sz) May 28, 2020
The cryptocurrency is currently facing bearish sentiments and “a healthy pullback might be needed before it can break above the $10,000 level again,” wrote Edward Moya, senior market analyst at Oanda.
Since halving, BTC price is stuck in a narrow range and failed to climb above $10,000 despite the high-profile investors like Paul Tudor Jones joining Bitcoin.
$BTC – Still remaining flat
Areas of interest:
* 94 – 95s
* Range highs
* Trendline underside
* Any signs of weakness and failure to hold 91s – then may flip short pic.twitter.com/QgeJltXmsG
— TraderXO (@TraderX0X0) May 28, 2020
Going forward, however, increased equity market volatility, low global bond yields, and rising debt-to-GDP levels are positives for bitcoin, according to Bloomberg Intelligence’s Mike McGlone. And should the stock market start selling off dramatically again, Bitcoin could benefit from that. He wrote,
“We view the benchmark crypto as a resting bull that likely needs something to change significantly in its 10-or-so-year history to not just resume doing what it was doing: Appreciating.”