Geopolitical Risk Is Back & It’s Bullish for BTC; Bulls Going Parabolic Now Is Not Healthy
For now, Bitcoin is keeping just under $9,000 after jumping to nearly $9,500 during this recent rally.
These gains also have the world’s leading cryptocurrency outperforming other assets in 2020. While bitcoin is up 20% YTD and gold about 12%, equities are down -9% YTD with oil in the lead with -80%.
As the crypto community repeatedly points out, all of this has been without the Fed bailout or stimulus support of any kind. Trader Cantering Clark said,
“Even with this recent correlation, Bitcoin is still making quite a case for itself as a higher beta gold 2.0. All it needs to do is capture a bit more market-share,”
“I think over the next 10 year period it is one of the best performing assets.”
April Rocking the Gains but Consolidation Needed
Interestingly, April has been a month of bulls for the past many years. In 2016, bitcoin recorded 8% gains then 28% in 2017, 33.5% in 2018, 30.7% in 2019, and this time yet again we continued the cycle of much higher returns at 34.6%.
“Q2 has been strong in 3/4 past years,” noted analyst Ceteris Paribus.
Some like trader Crypto Yoda however, are still not trusting this BTC rally fully yet because of its significant correlation to the traditional markets in the past months.
According to him, a consolidation period will be healthy for the long-term trend to build as continued push through the current level would force bulls to go parabolic and make the market more unstable and increase the “risk of a violent breakdown.”
Not correlated assets. https://t.co/nb6G5xZhYg
— The Wolf Of All Streets (@scottmelker) May 1, 2020
Although the correlation between bitcoin and the S&P 500 remains at unprecedented levels, it is unlikely to persist in the medium-term.
But “heightened geopolitical risk would be a good trigger for BTC and stocks to finally decouple,” said economist and trader Alex Kruger.
And this geopolitical risk is already back on as US President Donald Trump said on Thursday that he was confident the coronavirus originated in a Chinese lab.
TRUMP SAYS HE HAS SEEN EVIDENCE VIRUS ORIGINATED IN THE WUHAN INSTITUTE OF VIROLOGY IN CHINA
TRUMP SAYS HE CAN PUNISH CHINA FOR VIRUS BY RAISING TARIFFS
TRUMP SAYS CHINA EITHER COULDN’T STOP VIRUS IN TERMS OF COMPETENCE OR THEY LET IT SPREAD
Geopolitical risk is back.
— Alex Krüger (@krugermacro) April 30, 2020
Earlier in 2020, when the US airstrike killed Iran’s general Qassem Soleimani, gold and bitcoin surged. Now as the countries make plans to reopen the economies, the geopolitical risk might get back in focus and this could help strengthen bitcoin’s role as a safe-haven asset.
For now, bitcoin is following the stock market, and this means macro events might continue to affect the digital currency. But the stock market is divided if it is going to revisit new lows or the bottom is in.
$SPX – Stocks opening to the downside
Bitcoin already pulled back from high $9400s so not expecting anything drastic as fall as drops in #BTC unless stocks drop hard
Still support between $8400 to $8600 for Bitcoin (grey box) – expecting some ranging here pic.twitter.com/wXGXxyVdax
— Josh Rager 📈 (@Josh_Rager) April 30, 2020
The good thing for bitcoin is that central bankers remain committed to liquidity growth and bitcoin will benefit from this tailwind along with “increasing inflationary/debasement risks within traditional monetary systems,” said Richard Galvin CEO of Digital Asset Capital Management.
Also, the tech sector is leading the recovery in global markets and because “crypto provides pure, super-high-growth tech exposure so it should outperform,” he added.
The upcoming halving is another bullish tailwind but as we reported it could turn into a “buy the rumor, sell the news” event.