Bitcoin Approaches $6,000 Following Overnight Surge; Will the Rally Continue?
Bitcoin’s bullish breakout resumed on Tuesday, as the largest and most influential cryptocurrency surged more than 4% to notch new highs for the year. The BTC price traded above $6,000 on at least one exchange, marking a dramatic turn of events since the November-December flash crash that wiped out half of bitcoin’s market cap.
After a minor correction at the start of the week, bitcoin’s price surged past $5,900 on most major exchanges. The leading digital currency even peaked at $6,325 on Bitfinex, although that is largely due to the exchange’s excessive premium for BTC/USD.
When average prices are factored, bitcoin climbed 4.3% to $5,948.58, according to CoinMarketCap. At the current price, the Bitcoin network has a total value of $105.2 billion, which accounts for 55.8% of the overall market.
Since the start of the year, bitcoin has gained a whopping 59% and has vastly outperformed other major asset classes. Read more: How Does the Bitcoin Rally Compare to Crude, Stocks and Lean Hogs?
Bitcoin’s breakout extended to the broader cryptocurrency market on Tuesday, with all of the major large caps reporting gains. The combined cryptocurrency market capitalization peaked at $189.1 billion, marking a new high for the year.
Will the Bullish Breakout Continue?
Bitcoin is currently riding a three-month winning streak and looks poised to extend that rally into a fourth month. A closer look at things like network activity, key technical indicators and institutional interest suggest that the market began to turn long before the bulls took full control.
As Hacked reported back in March, bitcoin’s hash rate and mining difficulty have been in a sustained climb since the start of the year. From a network and price point of view, both are viewed as positive signals. According to data from Blockchain.com, Bitcoin network’s hash rate spiked to 58,109,199 TH/s on May 1, the highest since October.
Advances in Lightning Network, bitcoin’s second-layer scaling solution, have also made investors more optimistic about the future of crypto payments. The Lightning Network currently has 8,289 nodes, 38,330 channels and nearly $6.4 million in network capacity, according to 1ML.
Although bitcoin’s virtuous cycle may continue for the next few months, investors should brace for an equally punishing pullback at some point in the future. These shakeouts are not uncommon and usually do a good job of weeding out speculators and those who purchased bitcoin with excessive leverage. This is part of the reason why bitcoin falls so drastically during dominant uptrends (people who bought bitcoin on margin can’t withstand large pullbacks so they close their position, leading to an even bigger drop in prices).
That being said, most traders and analysts are convinced that the December bottom near $3,100 marks the cyclical low for bitcoin. This means a return to that level is highly unlikely. There’s just too much separation in terms of time and price to make such a devastating reversal likely.
This view was recently expressed by cryptocurrency trader Willy Woo, who said he’s “95% certain” the market has bottomed.
Just a few weeks ago, Woo surveyed other crypto influencers about the probability that bitcoin has already bottomed. These are the results:
I surveyed notable influencers, analysts and traders for their probability that the bottom is in for this bear market. Here are the results:
— Willy Woo (@woonomic) April 22, 2019
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.