After swinging wildly for most of this year, the price of bitcoin is now back to roughly where it started 2020 – around $7,100.
And since bitcoin is priced in dollars, the flat year-to-date performance really just means it's keeping pace with the U.S. currency, which has become one of the world's most in-demand assets as the coronavirus prompts a flight by investors everywhere into cash.
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If bitcoin were a government-issued currency, it would be one of the world's top performers – beating not only popular emerging-market tenders like the Mexican peso and South Africa's rand, but also advanced-nation stalwarts like the euro, British pound and Canadian dollar.
"Bitcoin is behaving as a store of value much the same as king dollar is behaving as a store of value," Paul Brodsky, partner at cryptocurrency and blockchain investment firm Pantera Capital, said in a phone interview.
Many cryptocurrency investors see bitcoin as a hedge against inflation, similar to gold. And many of those investors believe bitcoin will eventually benefit from the Fed's trillions of dollars of emergency money injections, which could spur inflation over the long term.
But guess what bitcoiners can already cheer about? Beating the euro during a year that the International Monetary Fund predicts will see the world's worst recession at least since the 1930s.
"What you would expect to see going forward are hard assets, like gold and bitcoin, outperform as fiat currencies get depreciated," said Greg Cipolaro, co-founder of cryptocurrency analysis firm Digital Asset Research.
Think about it this way: Dollars have been in such high demand from investors, businesses, governments and central banks around the world that the Federal Reserve has had to inject more than $2 trillion of new money into financial markets just to preserve stability.
There's no real comparison, of course, between the bitcoin market and the global market for dollars: The total outstanding value of all bitcoin ever created is currently around $130 billion, less than 1/100th of the $16 trillion U.S. money supply.
But as an investment, bitcoin is beating most world currencies and breaking even with the dollar.
One of the Fed's motivations for the massive money injections is, ultimately, just monetary policy: The U.S. central bank is trying to counteract the powerful deflationary forces of an economic contraction.
Oil, which is priced in dollars, is now trading at about $14 a barrel, down from $61 at the start of the year, based on the benchmark U.S. futures contract. That's deflation – a classic economic reaction to falling demand.
Bitcoin, by contrast, has held its value: One unit of the cryptocurrency now buys 507 barrels of oil, about five times what it could at the start of the year.
Any currency's ultimate value is its purchasing power. And bitcoin is holding its own against the almighty dollar.
Tweet of the day
Trend: Bitcoin is in the green again Thursday, after a small rally on light trading volumes.
The top cryptocurrency is currently trading near $7,100, representing a 2 percent gain on the day. The cryptocurrency continues to show no real sign of breaking from the recent narrow range between $6,500 and $7,300.
The MACD, an indicator used to judge momentum and change in trend, shows the potential for a move to the downside, courtesy of falling histogram bars hovering near the neutral 0 line.
Should a loss at the 50-day moving average occur (yellow line on chart) – currently around $6,771 – a deeper drawdown shouldn't be ruled out. A likely area of support in such a case would be toward the bottom of the range at $6,520 – a level that has held steady since April 2.
The relative strength index (RSI) is trending bullishly, however. Should the bulls defend the 50-day average and the RSI doesn't dip too far toward oversold, a bounce toward $7,300 is also plausible.
For now, traders will have to wait and see which direction is offered, as the all-important daily average should provide greater clarity moving forward.
It's worth remembering the miner reward halving is due in just 18 days, which has the potential to shake the market into action.