Bitcoin’s impressive run continued this week, with the market leader hitting several new yearly highs over the past few days. The push above $13,350 on Sunday marked the highest price seen since the top last summer, while yesterday’s (27 October) close of $13,654.22 was the highest since 15 January 2018.
Percentage Change in Price Over the Last Week
Bitcoin has seen a strong 2020 so far, recovering quickly after crashing in March. It has heavily outperformed both gold and the S&P 500.
This has arguably been driven, at least in part, by the shifting narrative towards increased institutional presence. A number of large companies, including MicroStrategy and Square, have recently added BTC to their balance sheets as an inflation hedge. At the same time, famous investors such as Paul Tudor Jones have also acquired BTC to their portfolio, similarly citing its qualities as an inflation hedge amidst the current climate of heavy global fiscal and monetary stimulus.
Price analysis
Bitcoin smashed through the $12k level last week and pushed above $13,000 last week, where it has managed to stay ever since. Sunday marked the highest weekly close for the bitcoin price since the beginning of January 2018 and investors are now looking for new highs again.
The $14,000 level, which marks the top of last summer’s run, is the obvious next level for bitcoin to test. If $14,000 is flipped to support, we could expect a run towards the all-time high seen December 2017. However, bitcoin has been very strong for a few weeks now, and a pullback to $12,000-$12,500 is also a possibility going into November.
Investors are getting greedy
The Fear and Greed Index has increased again over the past week, and we’re now seeing a positive market sentiment. The Index is currently at 61 after a drop down from the “Extreme Greed” area on Monday. As noted last week, when the sentiment pushes up to “Extreme Greed”, we normally don’t stay in that area for a long period of time. This is always important to keep in mind. However, we spent a full month in the “Extreme Greed” area back in August, and we could be in the very beginning of a new period with even more market exuberance.
Highest daily volume since May
The jump in price has also led to a spike in trading volume. As noted in last week’s report, traders were potentially returning to bitcoin again. This prediction seems to have been proved correct, with the bitcoin volume spiking massively throughout the week. Wednesday saw the highest spot bitcoin volume since May, with over $3.5 billion changing hands.
The 7-day average daily real bitcoin volume is now back to the levels seen in August. However, the volume over the past few days has not been very impressive and it will be interesting to see if this is just another short-term spike, or a real trend shift.
Short-term volatility jumps with the bitcoin price
As expected, bitcoin started moving last week. We got the largest daily return since the end of July on Wednesday, with a daily return just above 7%. This led to a spike in the 7-day volatility, which is now around 2.5%. As the price movements slowed down again after Wednesday, the volatility has not continued to climb this week, but more movements are not unlikely.
Bitcoin correlation with S&p
Bitcoin has been heavily correlated with the S&P since March, but this correlation has fallen with bitcoin’s recent move to the upside. This could be important going into the US election, with the likelihood of a turbulent outcome being considerably higher than in previous years.
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