Bitcoin is maintaining its upward trajectory as coronavirus-led risk aversion hits the traditional markets.
The
top cryptocurrency by market value crossed the 200-day moving average at $9,000
during Tuesday’s Asian trading hours and rose to a high of $9,150, pushing the
cumulative month-to-date gains to over 25 percent.
At press time, bitcoin is changing hands at $9,061. Despite the minor pullback from the morning’s high, the cryptocurrency is still reporting a 4.8 percent gain on a 24-hour basis, and is up roughly $700 from lows near $8,250 observed over the weekend, according to CoinDesk’s Bitcoin Price Index.
While bitcoin has kicked off the week on a positive note, stock markets across the globe are facing selling pressure.
Notably, the Dow Jones Industrial Average fell by more than 450 points on Monday with travel-related shares suffering sharp losses on fears the coronavirus outbreak in China could spread globally, hurting worldwide economic growth.
The virus, which first appeared in the Chinese city of Wuhan, is spreading fast. It has so far claimed more than 100 lives in China and the number of confirmed cases increased to 4,515 on Tuesday from 2,835 on Monday, according to the National Health Commission.
With bitcoin outperforming stocks amid the coronavirus scare, a few experts are convinced the cryptocurrency is drawing haven bids – more so, as classic safe-haven asset gold has risen by just 0.65 percent so far this week.
The safe-haven argument, however, is not strong, according to prominent analysts like Alex Kruger. “Keep in mind that until Friday the narrative was ‘Coronavirus pushing bitcoin lower’. It now is ‘Coronavirus pushing bitcoin higher.’ Some people try very hard to create narratives,” he tweeted Tuesday.
Moreover, bitcoin picked up a strong bid below $7,000 at least two weeks before Chinese authorities placed Wuhan under quarantine on Jan. 23, sending equity markets into a tailspin, and has extended the rally over the last two days.
In fact, the virus outbreak could ultimately have a negative impact on crypto markets, Jason Wu, CEO and founder of non-custodial crypto lender DeFiner, told CoinDesk earlier this week.
Many Chinese crypto retailers tend to cash in on cryptocurrencies right before the Chinese New Year holiday and reinvest in the market in the next year, Wu said. With the virus outbreak, that money may not return to crypto markets, possibly leading to a price drop.
From a technical perspective, bitcoin is looking heavy and could suffer a minor pullback in the next 24 hours.
Hourly chart
The relative strength index charted a bearish divergence (lower highs) earlier on Tuesday, signaling bullish exhaustion, and dived out of an ascending trendline to indicate an end to the rally from lows near $8,250.
The MACD histogram is printing deeper bars below the zero line, indicating a strengthening of downside momentum.
4-hour chart
The current four-hour candle is flashing red, validating the buyer exhaustion signaled by the preceding inside bar candle, which occurs when the specific period’s price action falls within the preceding period’s trading range.
The RSI has also rolled over from the overbought (above-70) region, signaling scope for correction.
Both the hourly and four-hour charts are indicating the cryptocurrency could revisit the former resistance-turned-support at $8,793-$8,750 (horizontal lines on the four-hour chart).
A violation there would expose the next support at $8,530. If that level holds, bulls might breathe a sigh of relief and another attempt higher could be initiated targeting resistance at $9,000.
The odds of a pullback to $8,750 would weaken if the cryptocurrency finds acceptance above $9,150 during the U.S. trading hours. In that case, the recent high of $9,188 will likely be scaled.
It’s worth noting that longer duration charts are aligned in favor of the bulls. So, pullbacks, if any, could be short-lived.
Disclosure: The author holds no digital assets at the time of writing.