Bitcoin has made immense progress since the lows seen in March.
As the chart below depicts, from the lows of $3,700, the cryptocurrency has gained in excess of 150%. This rally comes in spite of the global economy, heading into recession — a recession that the Federal Reserve, the Bank of England, and the International Monetary Fund have called the worst in decades.
It’s an outperformance that has left many wondering how sustainable Bitcoin’s rise is. Because if a brutal recession really is on the horizon, why should BTC outperform?
According to a top economist tracking the crypto markets, from the data alone (casting aside the macro backdrop), Bitcoin is showing it has “room” for a FOMO run.
Bitcoin Still Has Lots of Room to Rally
Alex Krüger, an economist and analyst in the Bitcoin space, found that BTC’s recent move past $10,000 was decisively different than the move to $10,000 in February earlier this year:
“Last time Bitcoin was around $10,000, in February, aggregated open interest was 65% higher and Bitmex XBT funding was 10 times higher, ticking at an approximately 100% annualized,” he wrote.
He indicated that this is a clear sign that the cryptocurrency market is less leveraged than it was during the last rally. The low funding rates and low open interest suggests that Bitcoin’s recent move was driven by spot investors on platforms like Coinbase and Kraken, as opposed to leveraged traders opening long positions on BitMEX and similar platforms.
The two core conclusions that can be drawn from this analysis, Krüger wrote, are simple: 1) there is “more room for a FOMO run,” and 2) there is “less room for a massive dump.” He added that it’s “impressive” Bitcoin has made it this high without showing signs of being overleveraged.
What Will Catalyze the FOMO?
With Bitcoin stalling around $10,000 over the past few days, it is clear the “FOMO” that was seen this week has largely subsided.
The next bout of buying activity will likely be caused by a confluence of things, the Bitcoin block reward halving included, some analysts have said.
Fundstrat Global Advisors, a New York-based research firm, identified four such trends that could catalyze Bitcoin buying activity in the near future:
- Bitcoin is the best-performing “asset class” in 2020, beating U.S. Treasuries and Gold amid a global recession. Treasuries are up 21% while the precious metal is up 13% — already much better performances than the S&P 500’s 10% drop.
- In a similar vein, BTC was the best-performing asset class of 2019, rallying 92% while the U.S. stock market gained around 20%.
- The block reward reduction, known as a “halving,” is taking place in three days, estimates suggest. Traders are getting prepared.
- Paul Tudor Jones, one of the world’s biggest macro investors, just announced his fund is taking a stake in Bitcoin futures. Jones believes the cryptocurrency will act as a hedge against inflation.
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