Bitcoin Quietly Rising From The Ashes
FOREX.com | Feb 12, 2020 17:39
For many traders, the recent parabolic surge in Tesla evokes a euphoria reminiscent of that surrounding cryptoassets back in late 2017, when Bitcoin peaked near $20,000. As we all know, Bitcoin (BitfinexUSD) ultimately collapsed to trade at just $3,200 a year later (though we wouldn’t expect that dramatic of a fall from Tesla, there’s a strong case for more downside if certain support levels are broken).
In any event, many traders who wrote off Bitcoin after its -85% drop may want to tune in again. The cryptocurrency has quietly risen from the ashes of despair to triple over the last 13 months. While the rally in price itself is certainly impressive, the most important word in that sentence may be “quietly.” Unlike the heady days in late 2017, when Bitcoin was a daily fixture in traders’ minds and financial media once it broke $10,000, relatively few market participants are even aware that Bitcoin has been rallying, much less obsessing over its day-to-day fluctuations.
Attention is notoriously hard to quantify, but using Google (NASDAQ:GOOGL) Trends search volume as a proxy, we can see that search interest in “bitcoin” was roughly 11 times higher at the peak in late December 2017. More to the point, search interest was already 7 times higher the first time Bitcoin broke above $10,000 in late November 2017:
Source: Google (NASDAQ:GOOGL) Trends, GAIN Capital
The relatively low level of retail interest in Bitcoin suggests that we’re nowhere near the mania levels that drove Bitcoin through $10,000 for the first time a little over two years ago. In other words, the formation of another similar bubble (a common occurrence in Bitcoin’s history to date) could lead to the cryptocurrency exceeding its previous record highs near $20,000.
While longer-term measures of sentiment remain subdued, the short-term price action suggests that Bitcoin’s rally may be due for a breather. Prices are approaching the highs from August, September, and October of last year in the $10,500-$11,000 range, with the RSI indicator showing signs of stalling out in overbought territory.
Given this backdrop, short-term bears could consider sell opportunities below $11,000 for a potential retracement back toward $9,000 or the mid-$8000s. Meanwhile, longer-term bullish traders may want to hold off on new purchases near current levels and wait for a pullback to accumulate more Bitcoin in case we see another bubble form.
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