Bitcoin's stealth rally past US$45,000 erases its losses for the year

The token rose as high as US$47,583 in early Hong Kong trading on March 28. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - Bitcoin's stealth rally over the past two weeks not only pushed it past a key level of US$45,000 - it also put the world's biggest cryptocurrency back in positive territory for the year.

The token rose as high as US$47,583 in early Hong Kong trading on Monday (March 28), well above the US$35,000 to US$45,000 range where it has been stuck since early January. With the fresh gains, Bitcoin is now up about 1.2 per cent for the year, compared with a 4.7 per cent decline for the S&P 500.

If Bitcoin can keep breaking through "in a meaningful way", it should gain a lot of upside momentum, said Miller Tabak + Co chief market strategist Matt Maley.

The coin has been stuck in a tight path as the United States Federal Reserve and other central banks remove some of the stimulus measures they put in place in response to the Covid-19 pandemic downturn. That means there is less cash to go towards riskier assets, including crypto. In addition, digital currencies have come under scrutiny recently, with speculation swirling that they could be used to skirt Russian sanctions, though many analysts rebuff that claim.

Even so, Bitcoin and other tokens like Ether started a steady advance this month, alongside broader increases in US stocks. But it took until the past day for Bitcoin to convincingly take out US$45,000, a level it had only briefly touched since early January.

"As we test the top of the 2022 trading range for the fifth time, this is another one of these Bitcoin moments when the narrative could swiftly change and investors pile in, propelling the Bitcoin price higher," said Nexo co-founder and managing partner Antoni Trenchev. "It might just be time to awaken from the Bitcoin-sideways slumber that's been 2022."

'Overbought' range

For all of Bitcoin's recent strength, its performance has been bested over the past few days by alt coins such as Cardano, Solana, Polkadot and Dogecoin. Cardano in particular has found favour with traders, jumping 30 per cent over the past five days. Those tokens remain down for this year, however.

Bitcoin was well above its 50-day moving average, which currently sits around US$41,085. That puts it around the 80th to 90th percentile and in the "overbought" range, according to Bespoke Investment Group. But, though that signals potential for a downturn in price for many assets, with Bitcoin it has historically been the opposite, Bespoke said.

"When it has been similarly overbought in its past (over the past five years), it has averaged significant gains going out one to 12 months," said the Bespoke report.

When Bitcoin has been in the ninth decile of its spread versus its 50-day average, it has historically risen 16 per cent in the next month, is up 100 per cent six months later, and has gained 274 per cent after a year, according to data compiled by Bespoke.

"This isn't normally what you see for the typical stock or ETF (exchange-traded fund), but because Bitcoin has mostly traded higher over the years and really has a lot of momentum trading behind it, overbought levels have yet to become a headwind for this particular space," Bespoke wrote.

Bitcon's gains since mid-March - even as Russia's war in Ukraine dragged on - has also bolstered it versus gold, its traditional safe-haven rival, which traded sideways during the period.

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