Bitcoin raced to a record high on Tuesday after receiving bullish tailwinds from booming institutional adoption to additional stimulus prospects in the US.
The price of the benchmark cryptocurrency, which some consider as a store of value in times of global financial stress, surged by as much as 5.65 percent in intraday trading to reach $50,645 per token, blasting past its previous record peak of $49,700 established in the previous session.
Bitcoin has rallied up to 73.08 percent this year and by more than 1,200 percent in the last eleven months, making it one of the world’s best-performing assets. Its gains have maximized as investors seek safe-havens against the economic fallout caused by the coronavirus pandemic and minimize central bank interventions’ effects on their portfolios.
Brian Melville, head of strategy at trading firm Cumberland, stated supply crunch as the primary bullish catalysts behind Bitcoin’s explosive boom. He noted that miners produced about 150,000 BTC between August and December. But traders bought 359,000 BTC in the same period, showing a huge gap between Bitcoin’s active supply and demand.
“It’s a really important metric to watch,” said Mr. Melville.
The trend continues in 2021. In February, Nasdaq-listed MicroStrategy bought more bitcoins when trading in the $30,000-35,000 range. In doing so, the software company increased its net bitcoin holdings to 71,079 BTC, roughly $1.145bn at the base price and $3.5bn per the current exchange rates.
MicroStrategy announced on Tuesday—just hours ahead of Bitcoin’s rally above $50,000—that it will raise $600 million by selling convertible senior unsecured notes to purchase more of the cryptocurrency units. The announcement strengthened Bitcoin’s anti-fiat, anti-inflation narrative further, given MicroStrategy’s earlier admissions of replacing its cash reserves with the cryptocurrency because of the former’s value depreciation.
Last week, US carmaker Tesla also revealed in its securities filing that it had purchased $1.5bn worth of BTC in January for the same reason. Twitter’s CFO Ned Segal said a day later that he is willing to add Bitcoin to the company’s balance sheets should its employees and vendors demand it as payment/wages.
Later, Mastercard and Bank of American Mellon announced integrating crypto services into their traditional finance business models, injecting the cryptocurrency market with additional hopes of institutional investments. Morgan Stanley’s $150bn investment arm also admitted that it is exploring Bitcoin for potential integrations.
Bitcoin Trade Setup
With fundamentals supporting Bitcoin’s bullish bias, the cryptocurrency looks poised to log a breakout above $50,000. Nevertheless, intraday setups show a short-term bearish outlook.
Bitcoin bears overtook the rally above $50,000, causing the cryptocurrency to flip lower during the early US trading session. It expects to go further low to retest the rising trendline slope support for a potential pullback towards the upper trendline. Nonetheless, breaking below the support risks sending BTC/USD down to the previous high range near $41,000-42,000.
“As long as $46,000-46,500 sustains support, I’m assuming the path towards $53,000 and possibly $63,000 is there,” said Michaël van de Poppe, an independent market analyst. “Losing $46,000-46,500 and I’m targeting the $42,000 zone next.”