It is February 1 and bitcoin is up by a modest 0.52 percent.
The benchmark cryptocurrency left an impressive month behind in January, returning 30.27 percent in profits against an otherwise gloomy global market outlook. The wild move upside marked bitcoin’s best January close in seven years, convincing traders that the gains could grow further heading into February.
So it appears, bitcoin’s bullish continuation theory – actually – has merits in the form of both fundamental and technical factors. NewsBTC has listed the top three upside catalysts among them, as follows.
#1 Bitcoin Correlation with Gold
The first signs of explosive growth in bitcoin prices came on the sidelines of a US-Iran geopolitical conflict. The cryptocurrency’s gains followed similar moves in the gold market as investors’ appetite for safe-haven assets surged. That brought an otherwise unpopular gold-bitcoin correlation to its four-year peak.
That was according to Arcane Research, a data analysis firm, that noted an increasing correlation efficiency of 0.3 between the two assets in mid-January. The company said in its report:
“This [correlation] will without a doubt strengthen the “digital gold” narrative for bitcoin.”
The surge in bitcoin and gold prices was also visible against the backdrop of the Coronavirus, a regional health epidemic that killed more than 150 people in China and infected more than 3,000 all across the world. Global financial reports indicated that investors piled into bitcoin to hedge against dwindling global equities.
With US stocks registering one of its weakest months in January, spooked by Coronavirus, it is likely for investors to keep their one foot in safe-havens this February. Bitcoin could benefit from it.
#2 Technical Resistance Broken
Those who do not believe in any correlation between traditional assets and bitcoin could find their bullish bias in the latter’s technical indicators.
The upside in bitcoin prices in January took the cryptocurrency above two very strong technical indicators. On the daily chart, it was the 200-daily moving average (or 200-DMA). Meanwhile, on the weekly chart, the indicator was the 50-weekly moving average (50-WMA).
In a majority of cases wherein bitcoin held its grounds above both the moving averages, the price rallied exponentially. Therefore, it is now likely that the cryptocurrency would stay above them heading into February, which serves as a strong bullish case for it.
#3 Litecoin Gains
Noted on-chain analyst Willy Woo said in January that any gains in Litecoin prices should signal a similar price rally for bitcoin.
The Adaptive Fund partner correctly predicted a breakout in the LTC/USD rate based on a so-called Litecoin Difficulty Ribbon, adding that he wouldn’t be surprised if that does not turn out to be bullish for BTC/USD.
The altcoin closed January in the green territory, rising by a massive 65 percent.
What if Litecoin is leading Bitcoin again, like it did last year? pic.twitter.com/VHB3RLm5rd
— Loma (@LomahCrypto) February 1, 2020
If history repeats, bitcoin could soon follow Litecoin’s gains to establish a new Q1 top.