Bitcoin traded above US$11,000 for the first time in 15 months, recouping more than half of the parabolic increase that captured the attention of mainstream investors before the cryptocurrency bubble burst last year. In Argentine pesos, the price of a bitcoin surged to over $460.000 on Monday, marking a new all-time high.
“The bounce-back of Bitcoin has been fairly extraordinary,” said George McDonaugh, chief executive and co-founder of London-based blockchain and cryptocurrency investment firm KR1 Plc. “Money didn’t leave the asset behind, it just sat on the sidelines waiting to get back in.”
Bitcoin surged as high as US$11,251.21 on Monday, a 13% gain from late Friday that put it at the highest levels since March 2018. It was at US$10,919 as of 11:01 a.m. in New York.
The largest cryptocurrency had a furious run higher in late 2017 that culminated with a top above US$19,500, before an almost-as-relentless move downwards over much of 2018. It languished around the US$3,300 to US$4,100 range for several months.
The Financial Times reported in May that, despite the massive decline in the value of Bitcoin, the cryptocurrency had reached an all time high in Argentine pesos. In other words, while most investors would have taken major losses if they had bought a bitcoin at the height of the bubble, they would have at least been better off compared to if they had bought pesos. Argentina’s strong devaluation and ensuing inflation caused a deep destruction of value for the Argentine peso, to the point where despite bitcoin’s dramatic fall from its all-time highs--it is still far from its trading records near US$20,000--it is already making records in peso terms.
Bitcoin’s ride back accelerated in April, puzzling onlookers trying to pinpoint a reason for the surge. A study by Indexica, an alternative data provider, showed three main drivers: a more complex conversation surrounding Bitcoin, fewer concerns about fraud and a shift in the tense of how Bitcoin is talked about from the past to the future.
“The market has matured greatly since the last time Bitcoin crossed US$10,000,” said Matt Greenspan, a senior market analyst at eToro. “This run is far more justified given the current level of adoption.”
In contrast with last year, there are now signs of renewed mainstream interest in cryptocurrencies and the underlying blockchain technology, most prominently Facebook Inc.’s Libra. The social-media giant is working with a broad group of partners from Visa Inc. to Uber Technologies Inc. to develop the system, which has already attracted attention and criticism from politicians raising privacy and security concerns.
The advent of Libra “is validating the crypto space and sending all the major digital coins higher,” said Edward Moya, chief market strategist at Oanda Corp. in New York. “Bitcoin volatility is likely to persist, with US$12,000 and US$15,000 as the next two critical resistance levels.”
Technical gauges followed by some traders suggest the rally may not be over soon. Bitcoin’s directional movement index is currently in the longest positive divergence since the 2017 euphoric rise. The DMI shows the direction of a price trend by charting the divergence between positive and negative levels. The index is currently in a strong positive divergence as seen by the divergence between the +DMI and -DMI indicators and the average directional index is above the pivotal 25 mark, which signals a strong trend and is tailing upwards towards 50 which indicates a very strong trend.
Still, the speed of the rally has some observers warning caution is once again warranted.
To Whitney Tilson, founder of Empire Financial Research and a former hedge-fund manager, Bitcoin is “exhibit A” in the lexicon of “scams that enrich insiders at the expense of average folks.”
“Don’t get fooled by the dead-cat bounce this year,” Tilson said in comments last week. “Mark my words: A year from now, it will be a lot lower. This is a techno-libertarian pump-and-dump scheme that will end in ruin.”