Bitcoin surged above $70,000 on Monday, reaching almost $71,000 in a 24-hour period ending at 5 p.m. ET. This price surge comes after the cryptocurrency recaptured its all-time high price, which was set at $73,768 on March 14. Bitcoin has been on a whirlwind journey in March, more than tripling in value since the beginning of last year. This surge can be attributed to a more risk-hungry market and U.S. regulators’ approval of spot bitcoin exchange-traded funds (ETFs) in January, which attracted billions of dollars of fresh capital injection into bitcoin.
Despite the recent surge in price, there is evidence that bitcoin could soon experience a sizable selloff. Technical analyst Tyler Richey pointed out that the relative strength index for bitcoin is at its lowest level since early February, indicating a potentially “frothy and overextended” market for the cryptocurrency. While technical analysis for crypto assets can be unpredictable, declining technical support coupled with elevated prices may indicate a looming pullback. Richey suggests that $52,000 could be a potential first spot of resistance for bitcoin, nearly 30% below its current price.
Bitcoin is currently the most valuable digital asset, with a total value of $1.39 trillion, accounting for roughly half of the $2.81 trillion crypto market. Five years ago, bitcoin was worth just $69 billion, but it has now surpassed the value of Apple, the world’s seventh largest public company by market capitalization. Despite trading activity that resembles a stock rather than a currency, bitcoin’s value stems from a widespread belief in its inherent value, rather than an expectation of returns like dividends or share buybacks. Institutional coverage and regulatory clarity for bitcoin are still lacking, but the approval of ETFs has allowed for direct exposure to bitcoin prices with low fees via traditional exchanges.
Bitcoin bulls, including those at the institutional level, have expressed optimism about bitcoin’s future potential. Analysts at Standard Chartered and Bernstein have set year-end price targets of $150,000 and $90,000 respectively. However, historical precedent for publicly traded assets following a sharp uptick in price suggests that there could be some near-term volatility. While predictions for bitcoin’s future price vary, there is a consensus that the cryptocurrency market can be unpredictable and subject to rapid changes.
It is important to note that bitcoin’s value lies in broad belief in its potential rather than tangible returns, leading to a lack of clear regulations and institutional coverage compared to traditional assets. The recent surge in bitcoin’s price can be attributed to various factors, including a more risk-hungry market and regulatory approvals. As the cryptocurrency market continues to evolve, investors should be prepared for potential volatility and fluctuations in prices. While some analysts remain optimistic about bitcoin’s future potential, others warn of the possibility of a looming pullback based on technical indicators and historical data. Bitcoin’s recent rally to above $70,000 may not be sustainable in the long term, and investors should proceed with caution in this ever-volatile market.
