It started as a short squeeze. Now a stealth rally in crypto currencies is turning into a stampede.
Bitcoin cash (BCHUSD) has almost doubled in the last week, while Ethereum (ETHUSD) is up almost 40 percent. Litecoin (LTCUSD) and Bitcoin (@XBT) have also advanced doubled digits, bucking a minor pullback in equity markets.
The rally began early on April 12 and has continued almost without interruption. The main catalyst seems to be the ending of fear that investors would would liquidate positions to pay federal income tax.
Now that cryptos are rising, some observers are starting to see reasons to remain bullish. First, they point to the fact that “altcoins” (tokens other than the iconic Bitcoin) are leading the charge as an indication of widening interest in the asset class. For example, the closely followed website www.coinmarketcap.com shows non-Bitcoin digital currencies account for 24 percent of total crypto market cap. That’s close to breaking the previous record of 25 percent on January 27.
Second, some potential risks have already passed. Congressional lawmakers showed little desire to thwart the industry during February hearings, and the Securities and Exchange Commission ruled in March that exchanges had to be registered. Other jurisdictions including Europe and Thailand also want to increase regulation. And, several private businesses like Alphabet (GOOGL) and Twitter (TWTR) have taken steps to ban cryptos. So all that bad news is priced in.
Finally, technicians may like what they see on the charts because all the major crytpos, including Bitcoin, are back above their 50-day moving averages. Failures at that level in early January laid the groundwork for a three-month bear market, so traders may feel more confident now that resistance has been broken.