Bitcoin’s recent volatility could presage significant rally if cryptocurrency’s past performance is any guide
Bitcoin’s abnormal price action that occurred last Thursday suggests that the largest cryptocurrency could be on the cusp of another major price spike, according to a Monday report by Bloomberg.
As reported by U.Today, the largest cryptocurrency came dangerously close to falling below the $18,000 level last Wednesday due to underwhelming inflation data. However, it managed to make a rapid U-turn together with the stock market, erasing all losses and ending the day in the green.
Some traders did not read too much into that massive intraday swing since Bitcoin remains highly correlated with the U.S. equities market.
At the same time, Bitcoin’s historical price action suggests that such a wild move could come on the cusp of a significant rally.
According to data presented in the report, Bitcoin has only had 15 daily trading sessions with such a strong bullish reversal. On average, the largest cryptocurrency would end trading 19% higher in two months after each such trading anomaly. While this data is not conclusive enough, it might give traders a clue about Bitcoin’s future trajectory.
Once again, however, it should be mentioned that Bitcoin’s correlation with the stock market remains exceptionally high this year, which is why its historical price action is not necessarily indicative of its future performance.
John Toro, the head of trading at Independent Reserve in Sydney, says that the biggest cryptocurrency remains vulnerable due to the current inflationary environment.
Bitcoin is likely to continue underperforming as the U.S. Federal Reserve keeps hiking interest rates.
The top cryptocurrency is currently trading at $19,460 on the Bitstamp exchange.