Despite ongoing uncertainty about the future of the economy, Bitcoin has gained strength, rising to $ 6,850 on Tuesday morning. This is a full 80% more than the low of $ 3,800 that the cryptocurrency hit worst "Black Thursday".
With this recent surge, cryptocurrency has risen 25% over the past five trading sessions, surpassing the majority of existing multi-billion dollar asset classes.
Bitcoin's recent strength coincides with the strongest open stocks in weeks. The Dow Jones Index opened about 7% and rebounded to the key price of 20,000 points. This appears to respond to the U.S. government's incoming coronavirus bailout.
The market rally also takes place after the Federal Reserve – America's central bank – has announced a historic move it will take to "support the flow of credit to households and businesses" and "support an effective transfer of monetary policy to more general financial conditions".
The announced measure: The central bank will buy any value of securities – be it government bonds, mortgage-backed securities (the securities that caused the great recession in 2008), corporate debt, municipal or government debt, etc. – to stabilize the economy. Many economists and analysts have called this "QE infinity," a monetary measure that would likely benefit assets, especially those with scarce resources such as gold and bitcoin.
Bitcoin continues to follow the pattern of the bullish textbook diagram
Analysts are gradually agreeing that Bitcoin is on a higher path.
An analyst recently shared the image belowand noticed that Bitcoin's recent price action looks incredibly similar to the bump-and-run reversal (BARR) floor given in the Bible for technical analysis Encyclopedia of diagram patterns.
This pattern is characterized by a number of price trends: 1) a downward trend leading to a massive vertical sell-off; 2) a basic pattern in which prices consolidate as long as the downward trend mentioned above occurs; 3) a rally behind the downtrend line formed in 1); and 4) a relapse into the trend line before a rise that leaves the bottom far behind.
Bitcoin is currently in the fourth phase, which means it will continue to rise from here when the entire pattern is complete.
This pattern is particularly noteworthy as it marked the low on the previous bear market that happened over 2018 and early 2019. If you viewed a chart from November 2018 to May 2019, you would find that the price action with all phases fits the textbook scheme almost perfectly.
The first asset to recover in a recession could be Bitcoin
The basics also seem to favor cryptocurrency growth.
Cryptocurrency analysts have found that markets may be on the verge of splitting into two types of assets: 1) those strengthened by historical monetary incentives 2) and those that will continue to underperform even in a world with central banks .
According to Willy WooBitcoin and gold, a well-known cryptocurrency analyst, both belong to the first category, just like gold during the last recession in 2008, when it bottomed out months before stocks and apparently rose due to expectations of monetary incentives and Fiat's devaluation.
Ari Paul, CIO of BlockTower Capital, confirmed this theory: Write in his own analysis on the issue that he is gradually becoming convinced that "BTC and gold will (and will) receive a sustainable bid before stocks recover".
To date, I have been convinced that we will have to wait at least a few months after the shares have bottomed out before the Fiat hedges (gold, BTC) sustain a strong bid. They are still risky assets, but Wall Street is ten times more focused on inflation and devaluation than in 2009.
– Ari Paul @ (@AriDavidPaul) March 23, 2020
He attributed this idea to the above-mentioned news from the Federal Reserve, many of which believe that they will drastically shorten the period of inflation, which in turn will favor assets that are scarce and cannot be blown away.