When the stock market began to crash due to economic weakness caused by the Coronavirus pandemic, Bitcoin (BTC) went down just as fast or even faster than the stock market. However, Bitcoin (BTC) has been consistently rising for 3 weeks now, and this begs the question, is the big Bitcoin (BTC) rally we’ve all been waiting for finally here?
Bitcoin dropped as low as $3,850 during the March 12 crypto crash, when a cascading liquidation on crypto derivatives exchanges drained out order books across the crypto space. The crash only stopped when BitMEX turned off for an hour. This cascading liquidation, which pushed crypto prices far too low, perhaps set the stage for a rally since it led to a surge of crypto investors scrambling to buy. Bitcoin (BTC) quickly rose to over $5,000.
Bitcoin (BTC) did make one more jog towards $4,000 on March 16, but since then it has been all uphill. Bitcoin (BTC) broke through the $6,000 level around March 20 and on April 2 broke through the $7,000 level, reaching as high as $7,200.
This means Bitcoin (BTC) has rallied 87% in just 3 weeks.
Notably, although Bitcoin (BTC) crashed along with the stock market up until March 12, after March 12 it has decoupled from the S&P 500’s trend as can be seen in the below chart.
Courtesy of TradingView, S&P 500 is the red line and Bitcoin is the red and green candlesticks
Essentially, Bitcoin (BTC) stabilized around March 12 and then began to steadily gain, even as the stock market continued to plunge. Indeed, by the time the stock market bottomed out on March 23, Bitcoin (BTC) had already been rising for over a week.
The stock market did ultimately stage a 20% recovery rally in only a few days. But the recovery rally cooled off and now the stock market is only 15% off of its lows, while Bitcoin (BTC) is continuing to steadily achieve new highs.
Considering all of this, it seems Bitcoin (BTC) is not destined to go down with the stock market and the rest of the economy. Rather, investors are now steadily rushing into Bitcoin (BTC) as an alternative investment, and a bull run is forming. This Bitcoin (BTC) rally could easily intensify since Bitcoin (BTC) has become one of the only asset classes that is truly rallying. Investors who typically invest in currently struggling asset classes like stocks and bonds could divert money to Bitcoin (BTC) en masse.
Further, the block halving is only 40 days away, raising the possibility that this is the formation of the major block halving rally that has long been anticipated. Indeed, a previous Crypto.IQ article explains how the stock-to-flow ratio predicts a Bitcoin (BTC) rally to over $50,000, and this rally would start right around May according to the model.
Essentially, the scarcity of an asset theoretically determines its price. The scarcity can be calculated by dividing the circulating supply by the yearly production, which is the same as the stock divided by the flow. The block halving causes the yearly production or flow of Bitcoin (BTC) to be cut in half, and Bitcoin (BTC) will become nearly as scarce as gold.
Therefore, there is solid logic that Bitcoin (BTC) will have a major rally due to the May block halving, just like after every previous block halving. This is yet another reason for investors to buy up Bitcoin (BTC) now, before the Bitcoin (BTC) price explodes due to Bitcoin (BTC) becoming much more scarce.
Thus, it is quite possible that this is the beginning of the big rally we have all been waiting for. Now that Bitcoin (BTC) has decoupled from the stock market, investors are likely to continue rushing into Bitcoin (BTC) since it is one of the only profitable asset classes. This rush of investors will also be enhanced as anticipation builds ahead of the block halving, and once the halving does happen selling pressure from miners will be drastically reduced, which should turbo boost the rally.
In other words, Bitcoin (BTC) might be about to go to the moon, and it is time to get on the spaceship.