Meanwhile, the U.S. stock markets are still trading in the red on a YTD basis. The S&P 500, Wall Street’s equity index, has pulled off a strong 21.5 percent rally from lows near $2,190 reached on March 23, but even so it’s still down 17.5 percent for the year.
Both bitcoin and the U.S. stock markets have witnessed a notable recovery rally over the past couple of weeks, but it’s the cryptocurrency that’s taken the lead.
Rally fueled by crypto investors
Bitcoin may be gaining altitude because the market is now dominated by long-term investors who believe in the narrative that the cryptocurrency is a hedge against global economic duress brought on by the coronavirus pandemic.
Bitcoin’s rapid drop from $8,000 to $3,867 seen on March 12 and March 13 was mainly fueled by long liquidations by institutions and macro traders. “These non-crypto dedicated professionals participants squared off their long positions to raise the cash needed to fund margin calls,” said Richard Rosenblum, co-head of trading at GSR.
“Following the liquidations, the market is primarily made up of crypto-native firms and long investors. Not surprisingly, bitcoin is acting more bullish,” Rosenblum said.
The coronavirus-led sell-off in the equity markets, triggered a global dash for cash, which saw macro traders sell everything from gold to bitcoin.
Derivatives market data does suggest institutions took a break from the crypto markets in March. Open interest, or open contracts, in futures listed on global exchanges fell from $4 billion on March 11 to $2 billion on March 14, according to data from research firm Skew.
The cryptocurrency is expected to maintain its upward trajectory and challenge the high of $8,000 seen just before the March 12 sell-off.
“Bitcoin is within shouting distance of its March meltdown level, and could make par by the weekend,” Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading firm Kenetic told CoinDesk.
Chu, however, warned the cryptocurrency is still on uncertain ground and could slip back below $7,000. A pullback may be seen if key resistance near $7,480 proves a tough nut to crack.
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