2 months ago
After the Bitcoin boom and bust of recent years, markets are now seeing signs of a crypto comeback. The first and most widespread cryptocurrency has taken flight in early 2020.
As we enter the second month of the New Year, 2020 appears to be shaping up as crypto comeback year. Bitcoin trading has remained bullish in recent weeks, with daily prices climbing to just under the US$ 10,000 mark. At time of writing, Bitcoin is trading at more than US$ 9,800. In addition, many different altcoins have been posting double-digit gains on a daily basis.
What exactly is driving this trend and where it is going are, of course, matters of speculation. Some analysts have pointed to the novel coronavirus epidemic and Bitcoin’s role as a safe haven in times of crisis. But like any interpretation of cause and effect, this must be regarded with great caution, and opposing views taken into account. Respected analyst Alex Krüger, for example, questions the safe haven argument. “Keep in mind that until Friday the narrative was ‘Coronavirus pushing bitcoin lower.’ It now is ‘Coronavirus pushing bitcoin higher.’ Some people try very hard to create narratives,” he tweeted Tuesday, January 28.
On the other hand, Fundstrat Global Advisors Managing Partner & Head of Research Tom Lee recently told Yahoo Finance, “Whenever Bitcoin breaks back into its 200 day, its average six-month gain is 197%.”
Futures trading: Market barometer
In general, however, futures can be regarded as a good barometer of market moods – and futures figures point to a continuation of the bullish trend. Skew Markets has published data showing Bitcoin futures with a May 2020 and June 2020 expiry date rising to US $10,000 or more at some exchanges.
At BitMEX, Bitcoin futures open interest (OI), which reflects the total volume of contracts that buyers and sellers have open on the exchange, has hit a new high of US$ 1.5bn. Crypto traders closely watch the OI figure for indications of trends. Up to now, many traders had expected that the market would begin offloading Bitcoin if OI reached US$ 1bn, which would drive the price of the cryptocurrency down. Many analysts see the fact that Bitcoin price and OI have increased in parallel as an indication that the trend is robust. If price, volume and OI move in opposing directions, this is seen as a sign of market weakness.
Steadily rising OI
In fact, OI has risen at several exchanges over the past few weeks. Bakkt followed the trend with open futures positions reaching a record high US$ 13m on February 5. The Chicago Mercantile Exchange saw similar developments, and Bitcoin futures hit a 5-month high of US$ 249m.
The global cryptocurrency now has a market cap of US$ 276.2bn. Bitcoin accounts for 64.3%. But altcoins continue to gain traction, with Tron (TRX) rallying 11.08%, Binance Coin (BNB) gaining 6.75% and Ether (ETH) edging up 4.49%.
The Year of the Rat is young, and so is the Bitcoin rally. Whether 2020 turns out to be crypto comeback year remains to be seen.
Please note: Blocks99 does not provide legal or investment advice. Please refer to our legal text.
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