Is Bitcoin Poised for a Big Bull Run?

Companies like Goldmoney Inc (TSX:XAU) have split from Bitcoin and cryptocurrencies. That is still not dissuading the Bitcoin bulls.

| More on:
A depiction of the cryptocurrency Bitcoin

Image source: Getty Images.

The price of Bitcoin has built solid momentum since the beginning of February. It recently entered technical bull territory. Earlier this month, I’d recommended that investors avoid Bitcoin and other cryptocurrencies.

Many companies that had confidence in crypto trading in late 2017 and early 2018 have since drifted away. Goldmoney (TSX:XAU), a financial technology company involved in precious metals trading, started offering Bitcoin and crypto trading on its platform in late 2017. This month, Goldmoney announced that it would cease offering Bitcoin and other crypto trading. It is giving customers the option to liquidate or move holdings to another crypto wallet.

The loss of faith from a prominent fintech company is a troubling sign. Cryptos were fighting, and seemingly winning, the battle of legitimacy in early 2018.

I continue to believe that regulatory roadblocks and skepticism will apply downward pressure to Bitcoin and cryptos like Ethereum (ETH). However, today we are going to explore a more optimistic outlook.

Naeem Aslam, chief market analyst at the forex online broker ThinkMarkets UK, is projecting a return to a prolonged bull run for Bitcoin and the crypto market at large. Aslam points to some positive technical indicators, including a move to the 50-week moving average. The bull case here is a home-run swing, as Aslam forecasts that Bitcoin can reach as high as $400,000. This may inspire flashbacks among investors. At the peak of the Bitcoin craze, some bulls were enthusiastically calling for the $1 million Bitcoin.

Other Bitcoin bulls are citing broader market conditions as a reason for it to return to form. The U.S. dollar has encountered some resistance, as the U.S. Federal Reserve turned dovish in late 2018. Bulls theorize that Bitcoin will receive the same push precious metals have over this period, especially if rates remain paused into 2020.

Bitcoin enthusiasts also point to the adoption of blockchain technology as a positive sign going forward. Indeed, banks like Royal Bank, JPMorgan, and others have experimented with the technology. Royal Bank announced in 2018 that had successfully facilitated transactions using the blockchain.

However, analysts have warned that the influence of this technology may be overstated. A report from the consulting firm McKinsey & Company argued in January that the evidence for a practical, scalable use for blockchain technology is in question. The research firm Gartner held its annual Symposium event in February and warned against exposure to blockchain, at least for now.

Bitcoin futures volumes have plummeted in March. There was a spike in volumes in early February as Bitcoin threatened the $4,200 mark, but this quickly petered out. These volumes are unlikely to produce the kind of price movement that bulls are calling for.

There is still interest in Bitcoin, and that is okay. Those invested in crypto should be adequately diversified to protect themselves from risk. This is especially true today. Investors who are dipping into crypto need to exercise caution at this stage. If this low volume continues, investors risk buying into a break-out trap with newcomers looking to enter on the path to $5,000.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Investing

Doctor talking to a patient in the corridor of a hospital.

TFSA: Healthcare Dividend Stocks Are Perfect for Passive Income

Top healthcare dividend stocks like Extendicare Inc. (TSX:EXE) and others can provide huge passive income in your TFSA.

Read more »

TFSA and coins
Tech Stocks

TFSA: Invest in These 2 Stocks for a Legit Chance at $1 Million

Are you interested in building a $1 million portfolio? Invest $20,000 in these two stocks!

Read more »

edit Person using calculator next to charts and graphs

The Top TSX Stock on My Watch List Right Now

Here's why Alimentation Couche-Tard (TSX:ATD) remains a top TSX stock that long-term investors seeking growth and yield will want to…

Read more »

Hourglass projecting a dollar sign as shadow

3 Stocks to Add to Your TFSA ASAP

Given their stable cash flows and solid underlying businesses, these three stocks are excellent additions to your TFSA in this…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Better Buy: Fortis Stock vs Enbridge

Fortis stock and Enbridge are top dividend stocks on the TSX today. Which stock is better buy for safe dividend…

Read more »

Canadian Dollars
Dividend Stocks

How to Make $1,500 in Passive Income 4 Times a Year

Blue-chip TSX stocks such as Enbridge can enable investors to create game-changing wealth over the long term.

Read more »

Woman has an idea

5 Stocks You Can Confidently Invest $500 in Right Now

Consider putting your surplus cash in these stocks for stellar capital gains.

Read more »

Dividend Stocks

TFSA: How to Easily Turn $10,000 Into $500/Year of Passive Income

You don't need to be a stock market expert to turn $10,000 into a $500 of tax-free passive income. Here's…

Read more »