Bitcoin moved back over $9,000 earlier on Tuesday alongside signs of an improved risk appetite in the traditional markets.
Prices rose to a high of $9,010 at 08:05 UTC, but quickly fell back below $8,900, pouring cold water over excitement generated by Monday’s 2.3% bounce from the two-week low of $8,630.
At press time, the number one cryptocurrency by market value is changing hands near $8,860, according to CoinDesk’s Bitcoin Price Index.
Meanwhile, the futures tied to the S&P 500, Wall Street’s equity index, are reporting over 2% gains Tuesday. Major European equity indexes are flashing green, too, with the U.K.’s FTSE index leading the way with a 1.33% gain, as per Investing.com.
West Texas Intermediate (WTI) crude, North America’s oil benchmark, has so far scored a 2.4% gain on the day, while safe havens such as gold, Japanese yen and the U.S. dollar are nursing losses.
Risk sentiment seems to have been buoyed by reports of a potential coronavirus vaccine. U.S.-based biotech company Novavax said on Monday it is beginning a phase 1 clinical trial of its COVID-19 vaccine candidate in Australia. Results are expected in July.
Bitcoin closely tracked action in the equity markets in March and April before decoupling in the two weeks leading up to the reward halving event on May 11. With halving behind us, the cryptocurrency may again start taking cues from equities.
As a result, some traders may expect the cryptocurrency to chart a strong break above $9,000 during the day ahead. However, major exchanges like Bitstamp, which is included in the calculation of Bitwise’s “real” bitcoin trading volume figures, have registered low volumes during the last 24 hours.
That may be gloomy news for the bulls because a low-volume move is often short-lived, according to technical analysis theory. Thus, the sustainability of the recovery toward $9,000 is in question.
Further, the short-term bias looks to have turned bearish due to cryptocurrency’s recent violation of a two-month bullish trendline.
“The steep upwards trend was broken this weekend, and the BTC price crossed the line which has acted as support several times over the past month. If the downwards price action continues, the lower $8,000 area is an important support zone for the price and should see a lot of buyers coming in,” said a weekly update produced by the cryptocurrency exchange Luno and Arcane Research.
Adrian Zdunczyk, a chartered market technician and CEO of trading community The BIRB Nest, also cited the $8,100–$8,000 area in a weekly update. Zdunczyk, however, is still bullish for the long term, as are most observers.
Investors seem to be accumulating coins amid the price drop. On-chain data provided by blockchain intelligence firm IntoTheBlock shows the number of bitcoin addresses holding coins for over a year has reached a new record high of 19.44 million this month, toppling the previous lifetime high of 19.08 million in April.
The metric has been on an upward trajectory for 12 months and is indicative of a strong holding sentiment.
“Record-high long-term holders not only shows the growth of bitcoin’s store-of-value use case, but it also demonstrates the fierce conviction of investors who held tight during the 50% market drop, believing it to be a reliable long-term haven against increasingly unpredictable public markets,” said Jehan Chu, co-founder, and managing partner at Hong Kong-based blockchain investment and trading firm Kenetic Capital.
There’s a general consensus in the investor community that bitcoin is a hedge against the fiscal and monetary imprudence practiced by governments and central banks over the years, and more so, recently in the efforts to combat the coronavirus-led slowdown in the global economy.
“Investing in tech companies is no longer good enough; investors are now choosing to invest directly in the crypto infrastructure the future will run on,” Chu said.
From a technical analysis standpoint, the overall bias would once more turn bullish if and when prices rise above $10,000. The immediate bearish bias would be invalidated if the risk-on seen in traditional markets powers the cryptocurrency above $9,310.
Disclosure: The author holds no cryptocurrency at the time of writing.