The cost to purchase one Bitcoin surpassed $50,000 per token for the first time in history.
Traders pumped the flagship cryptocurrency towards a new record high of $50,645 ahead of the New York opening bell on Tuesday. Their upside bias took cues from a sequence of optimistic events that happened last week, ranging from Tesla’s $1.5bn investment into Bitcoin to the Mastercard and BNY Mellon’s decision to integrate the cryptocurrency into their existing financial services.
Pump, Dump, Pump Again
Bitcoin’s ballistic move above $50,000 also appeared against a weaker US dollar sentiment, led by the Federal Reserve’s open-ended quantitative easing programs and the US President Joe Biden’s relentless efforts to pass his $1.9tn coronavirus stimulus package through public support.
Bitcoin hits $50,000—and then drops. Source: BTCUSD on TradingView.com
Nevertheless, traders with short-term risk appetite decided to ignore Bitcoin’s long-term bullish outlook. They effectively liquidated their bullish positions above $50,000 to secure profits, leading the BTC/USD exchange rate lower by as much as 4.22 percent to $48,510.
The 200-5M simple moving average stopped the correction from extending its bias. Bulls re-entered the market in the $48,500-49,000 area to resend the price upward. The higher low formations on the five-minute chart confirmed a renewing upside retracement move, pointing to the possibility that BTC/USD reclaims $50,000 and breaks out further northward.
“As long as $46,000-46,500 sustains support, I’m assuming the path towards $53,000 and possibly $63,000 is there,” noted Michaël van de Poppe, an independent market analyst. “Losing $46,000-46,500 and I’m targeting the $42,000 zone next.”
Bitcoin Bubble Woes
Bitcoin’s meteoric rise to $50,000 from the depths of $3,858 last March also raised worries about a potential bubble burst. In the comments that followed Tesla’s investment, economist Nouriel Roubini, gold bull Peter Schiff, and Bank of Canada’s deputy governor Tim Lane rubbished the cryptocurrency’s bull run as speculative mania.
“The recent spike in their prices looks less like a trend and more like a speculative mania — an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price,” said Mr. Lane in a speech last week.
Nonetheless, Bitcoin drew support from the same branch of economists and financial professionals. Duncan MacInnes, a fund manager at Ruffer, a traditional investment firm in the United Kingdom, projected Bitcoin as “a birth of a new asset class.”
“Bitcoin is emerging from the shadows, being co-opted by establishment institutions and becoming a legitimate alternative asset for investment portfolios,” he said.