The cost to purchase one Bitcoin surpassed $50,000 per token for the first time in history.
Traders pumped the flagship cryptocurrency towards a new record high of $50,645 ahead of the New York opening bell on Tuesday. Their upside bias took cues from a sequence of optimistic events that happened last week, ranging from Tesla’s $1.5bn investment into Bitcoin to the Mastercard and BNY Mellon’s decision to integrate the cryptocurrency into their existing financial services.
Pump, Dump, Pump Again
Bitcoin’s ballistic move above $50,000 also appeared against a weaker US dollar sentiment, led by the Federal Reserve’s open-ended quantitative easing programs and the US President Joe Biden’s relentless efforts to pass his $1.9tn coronavirus stimulus package through public support.
Bitcoin hits $50,000—and then drops. Source:
Nevertheless, traders with short-term risk appetite decided to ignore Bitcoin’s long-term bullish outlook. They effectively liquidated their bullish positions above $50,000 to secure profits, leading the BTC/USD exchange rate lower by as much as 4.22 percent to $48,510.
The 200-5M simple moving average stopped the correction from extending its bias. Bulls re-entered the market in the $48,500-49,000 area to resend the price upward. The higher low formations on the five-minute chart confirmed a renewing upside retracement move, pointing to the possibility that BTC/USD reclaims $50,000 and breaks out further northward.
“As long as $46,000-46,500 sustains support, I’m assuming the path towards $53,000 and possibly $63,000 is there,” Michaël van de Poppe, an independent market analyst. “Losing $46,000-46,500 and I’m targeting the $42,000 zone next.”
Bitcoin Bubble Woes
Bitcoin’s meteoric rise to $50,000 from the depths of $3,858 last March also raised worries about a potential bubble burst. In the comments that followed Tesla’s investment, economist Nouriel Roubini, gold bull Peter Schiff, and Bank of Canada’s deputy governor Tim Lane .
“The recent spike in their prices looks less like a trend and more like a speculative mania — an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price,” said Mr. Lane in a speech last week.
Nonetheless, Bitcoin drew support from the same branch of economists and financial professionals. Duncan MacInnes, a fund manager at Ruffer, a traditional investment firm in the United Kingdom, projected Bitcoin as “a birth of a new asset class.”
“Bitcoin is emerging from the shadows, being co-opted by establishment institutions and becoming a legitimate alternative asset for investment portfolios,” he said.
