Within 2 hours, the bitcoin price surged from $7,500 to $8,000 – by more than six percent against the U.S. dollar – moving close to $8,100 on major exchanges like Coinbase and Binance.
Why Bitcoin’s Long-Anticipated Pullback Might Not Happen
According to traders like Josh Rager, if the bitcoin price continues to demonstrate strong momentum above $8,000 and climbs above key resistance levels in the near-term, the asset could reclaim its bullish short-term trend.
“Nice 6% pump by BTC. Sentiment was a little too bearish after that weekly close. Even I expected further downside Range remains the same and would like to see a daily close above $8200,” he said.
Prior to the sudden surge in the bitcoin price, many technical analysts indicated the likelihood of a pullback extending throughout the near term based on the historical performance of the asset.
Following the day’s unexpected rally, Thomas Lee, the co-founder of Fundstrat Global, suggested that bitcoin may experience its “10 best days” in the near future, considering that technical indicators pointed toward an intense pullback.
“Is today another ‘10 best days’ for Bitcoin? Especially given how so many have pointed out ‘bearish’ technical formations over the past few days,” said Lee.
In April, Lee noted that bitcoin tends to generate all of its performance within ten days of any year, meaning that the asset sees days of extreme volatility, sustaining its momentum.
Reminder that BTC generally generates all of its performance within 10D of any year. [Excluding] the top 10 days, BTC is down 25% annually since 2013. For equities, ex-top 10 days, the S&P 500 only cedes 300bp per annum. The obvious conclusion is top 10 days way more influential for BTC than equities; HODL the other 355 days?
Investors have started to suggest the possibility of bitcoin breaking the trend it has seen in the past five years given the structural changes in the global crypto exchange market.
An experienced derivatives trader, for instance, said that capital that has flown in from institutional investors throughout the past two years is not moving out of bitcoin as easily as before as institutions tend to invest with a long term thesis.
Will Institutional Money Change the Macro Landscape for Bitcoin?
In the first quarter of 2019, Grayscale, a crypto asset investment firm with $2 billion in assets under management, saw 73 percent of all investments into its products come from institutions.
“Institutional investors comprised the highest percentage of total demand for Grayscale products in the first quarter (73%). This was also consistent with their share of inflows over the trailing twelve months (73%). As we have mentioned in previous reports, many institutional investors may view the current drawdown as an attractive entry point to add to their core positions in digital assets,” the report read.
As a growing number of investors with a long term perspective enter the crypto market, some strategists believe that large pullbacks to the tune of 30 to 40 percent that frequently occurred in previous years may not occur moving forward due to the significant change in the infrastructure supporting the asset class.