Column: Was Bitcoin’s Rally This Week Inevitable?


This column was translated from Crypto Lab, a wholly owned subsidiary of Monex Group (Tokyo, Japan). Monex is the parent of TradeStation Group. Its original author is Crypto Lab analyst Masamichi Matsushima.

People like me, who’ve watched Bitcoin (BTC) for a long time, were pretty bored in early 2019. We saw huge moves in previous years, followed by relatively minor fluctuations more recently. Until this week, that is!

Within a few hours on Tuesday, BTC surged almost 100,000 yen, or about $900. There were several factors, like accumulated corporate developments, an improved regulatory environment and better sentiment in global financial markets. But we had also seen volumes steady increase since the start of the year, which almost made a big move inevitable.

While the rally may not draw new participants to cryptocurrencies, previous investors will likely re-enter the market. Naturally, if prices go up, money will start to flow. And it will come against a backdrop of an improving regulatory and investment environment.

Bitcoin (BTCUSD), daily chart, showing this week's sharp rally.
Bitcoin (BTCUSD), daily chart, showing this week’s sharp rally.

At the same time, I’ve never liked seeing pundits on the Internet urging their readers to buy or sell Bitcoin. As soon as it rallies, they’re bullish and cry “let’s ride it up!” Then it drops and they yell “be careful, it’s falling again!” They don’t give solid reasons. They just stick their fingers in the air and tell you which way the wind is blowing.

What Next?

Some observers may be worried about the staying power of the current move now that prices are surging again. In fact, I am one of them because high volatility can be a problem for cryptocurrencies.

Traders might like the movement, and investors may love the long-term value. But violent swings in the near-term aren’t ideal for a product used in everyday transactions. That’s one more reason why we need to distinguish between the different kinds of tokens. I’m glad the U.S. Securities and Exchange Commission’s (SEC) new framework starts to address this important issue.

This week’s surge was definitely impressive, but now could be the time to let the crypto market take a breath and see how sentiment plays out.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.