NEW YORK – Following a swift rally over the past week, the Bloomberg Galaxy Crypto Index is now coming up against a key inflection point.
The index, which tracks some of the largest digital currencies, is approaching 350, a so-called technical resistance line that once acted as a support. If it can break through 350, then it could rally toward the 400 area, implying a near 15 percent gain.
The index has flirted with that resistance level over the past three trading days, with Bitcoin and Ether – its two largest holdings – leading it higher. On the downside, the index could find support around 300.
Cryptocurrencies have moved in tandem with riskier assets over the past month. On Monday, US stocks rose, spurred by optimism the world’s largest economy may start to re-open soon, with the Bloomberg Galaxy Crypto Index gaining as much as 2.9 percent to trade around 343. Bitcoin, which makes up about 30 percent of the index, advanced as much as 1.9 percent to trade near $7 700.
A 260-day volatility measure of Bitcoin is at a record low versus the S&P 500, which indicates a price appreciation tilt toward the cryptocurrency, according to Bloomberg Intelligence’s Mike McGlone.
“Bitcoin volatility in decline is indicative of maturation and a consolidating bull market,” McGlone wrote in a note. “The original cryptocurrency appears to have weathered the financial-market storm and is on sounder footing on the back of a price decline into good support with indications of increasing adoption.”
Some crypto enthusiasts are pointing to Bitcoin’s upcoming halving as a positive catalyst. The event, which is sometimes referred to as halvening, is a planned reduction in rewards miners receive and is slated to happen in May. Ahead of the last two halvings, Bitcoin’s price surged, pushing some to posit there could be a similar repeat this time around. Last week, Bitcoin once again crossed the $7 500 threshold to reach its highest level since before the coronavirus-induced crash in early March.
“There are so many moving parts to the Bitcoin economy that some potential effects from the halving are likely not fully baked into the price of Bitcoin at this moment,” said Don Wyper, chief operating officer at DigitalMint. “After the previous halvings, the price of Bitcoin skyrocketed, so my opinion is that long-term Bitcoin is currently undervalued and I expect short-term increased volatility.”
By Vildana Hajric