First Mover: Two Weeks From Halving, Bitcoin Rally Brings $10K Into View

Bitcoin has strung together seven consecutive daily gains, something that hasn't happened since the price shot up to last year's high around $13,000 in July.

The cryptocurrency's price now stands at over $7,750, up 8 percent so far in 2020.

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And with the Bitcoin blockchain's once-every-four-years rewards halving now just two weeks away, some analysts are starting to fix their sights on the next upside target: $10,000.

“Look for prices to attempt the $10,000 level on speculative buzz leading into the halving,” Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading firm Keneti Capital, told CoinDesk.

"A break above $10,000 would be significant from both a psychological and a technical standpoint," the research firm Delphi Digital wrote Monday in a note.

"With everything going on right now, it could also just bust through the top and zoom toward the next point of resistance, possibly near $10,000," Mati Greenspan, founder of Quantum Economics, told clients.

The emerging price target represents a 29-percent increase from current levels, but bitcoin had traded as high as $10,500 in February prior to the coronavirus sell-off. According to Delphi Digital, any price rise could gather steam if bitcoin crosses above its 100-day and 200-day moving averages, now around $8,000.

Bitcoin's third halving since its launch in 2009 is two weeks away: According to CoinDesk's Bitcoin Block Reward Halving Countdown clock, it's estimated to take place on May 12.

Investors continue to debate whether the halving will actually spur a big rally in bitcoin's price, or if the event is already baked into the market, merely an overhyped narrative pushed by bulls. One analysis published Monday on Medium by a poster under the name "PlanB" predicted that bitcoin's price could increase 37-fold to $288,000 by 2024, citing an increasingly cited metric known as the "stock-to-flow model."

Before the coronavirus hit, the halving was supposed to be bitcoin's biggest calendar item of 2020. Now, traders are scrambling to adjust their forecasts to square the deflationary impact of the global recession with the potentially inflationary impact of trillions of dollars of Federal Reserve money injections. Bitcoin is seen by many cryptocurrency investors as a hedge against inflation.

This week, the Fed's monetary policy committee will hold its first regularly scheduled two-day meeting since the pandemic sent global markets reeling, and Chair Jerome Powell on Wednesday is expected to update investors on the outcome of the closed-door discussions. According to German lender Deutsche Bank, the U.S. central bank could start looking for ways to stimulate an economic recovery – pivoting past the emergency actions taken in recent months to keep markets from collapsing.

Joshua Frank, CEO of The Tie, a provider of data on digital assets, told CoinDesk this month that any price impact from the halving might look puny compared with the massive economic upheaval and government response.

The Congressional Budget Office projected Friday the U.S. federal budget deficit will reach $3.7 trillion in fiscal 2020 – nearly four times the $1 trillion gap estimated as recently as March. Such an imbalance would boost U.S. debt, as a percentage of gross domestic product, to 101 percent.

Six years ago, the CBO predicted the ratio would reach 100 percent somewhere around 2039. In other words, the milestone is on track to arrive some two decades early.

"At some point, investors would begin to doubt the government’s willingness or ability to pay its debt obligations," the CBO wrote in a July 2014 post.

Better add that to bitcoin's 2020 calendar.

"The perfect macro storm is now upon us, one about which many crypto investors have dreamt about since entering this asset class," Jeff Dorman, chief investment officer for cryptocurrency fund firm Arca, wrote Monday.

The halving is imminent, though, so it's taking center stage.

Kraken, a San Francisco-based cryptocurrency exchange, announced Monday it would host an Ask Us Anything session about the halving, featuring Business Development Director Dan Held and Bitcoin Strategist Pierre Rochard, moderated by Pete Rizzo, the exchange's editor-at-large.

The session will offer "tips for translating tough bitcoin concepts to friends and family," according to a post on Kraken's website.

Those might include a delicate explanation of how bitcoin might benefit from a global pandemic and the worst economic downturn since the Great Depression.

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Bitcoin watch

Trend: Bitcoin's ascent looks to have paused amid mixed action in the global equity markets and a renewed sell-off in oil.

The top cryptocurrency is trading near $7,760 at press time, having failed twice in the last 24 hours to post sustainable gains above $7,800. Prices have risen by nearly $1,000 in the last seven days, according to CoinDesk's Bitcoin Price Index.

Most analysts expect bitcoin to rise well above $8,000 in the short term on the speculative buzz leading into the halving – the supply cutting event due on May 12. However, further gains may not be seen immediately if the latest oil price slide destabilizes the traditional markets.

The front-month June futures contract on West Texas Intermediate (WTI) crude is down over 18 percent at $10.40 per barrel at press time. The sell-off gathered steam Monday after the United States Oil Fund LP, the biggest oil exchange-traded fund, said it is planning to take out all funds invested in the June WTI contract.

The oil price slide looks to have applied the brakes to the global equity market rally, which had picked up the pace on the Bank of Japan's unlimited stimulus plan. Asian stocks lacked consensus early on Monday, as indices in Japan, Australia and China suffered moderate losses, while shares in South Korea and Hong Kong eked out gains.

While major European indices are currently reporting moderate gains, futures tied to the S&P 500 indicate the index is likely to open on a flat note, having rallied by 1.4 percent on Monday.

If equities turn risk averse, tracking the decline in oil, buying interest around bitcoin could weaken, allowing a daily price drop for the first time in over a week. A bearish divergence of the four-hour chart relative strength index favors a price pullback to support at $7,500.

But any losses could be short-lived because dip demand is likely to be strong, courtesy of the bullish narrative surrounding the halving.

Notable long-duration indicators are also beginning to roll over in favor of the bulls. For instance, the weekly Chaikin money flow indicator, which takes into account both volumes and prices, has crossed above zero, indicating a bullish reversal.