Bitcoin rebound puts $20 000 level in sight as next big test - TechCentral

Bitcoin rebound puts $20 000 level in sight as next big test

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Bitcoin’s recovery from a rout last week is stoking speculation that the cryptocurrency can breach US$20 000 for the first time.

The digital asset is trading near the all-time high of $19 857.03 set on Monday, after jumping 15% since one of its worst one-day drops this year on 26 November.

“We should surpass $20 000 this week, targets being anywhere around $20 000 to $25 000,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore. But after that he expects a 30% drop since bitcoin tends to “get everyone bullish and then dump”, he said.

Bitcoin’s proponents argue a widening investor base shows the largest cryptocurrency is coming of age. Critics say this year’s 170% rally is a bubble despite claims that digital assets are increasingly being used to diversify portfolios and taking some flows away from gold.

Bitcoin was trading at about $19 410 as of 3.40pm in Tokyo. The broader Bloomberg Galaxy Crypto Index, which has more than tripled this year, was little changed.

Institutional buying

The surge in bitcoin to a record this week “is likely a result of major institutional investors joining the bandwagon and purchasing a portion of BTC’s limited supply in the midst of a bull run”, said Gunnar Jaerv, chief operating officer of Hong Kong-based custodian First Digital Trust.

JPMorgan Chase & Co strategists said in a 27 November note that investments into and out of the Grayscale Bitcoin Trust — a fund that invests in and tracks the price of the digital asset — is among the keys to the price outlook.

If flows into the trust wane, bitcoin could suffer should commodity trading advisors and other quantitative funds again unwind long bitcoin futures positions as likely happened in last week’s slump, according to the strategists.  — Reported by Eric Lam, (c) 2020 Bloomberg LP

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