A key cryptocurrency indicator is signaling for the first time since June that Bitcoin, which has already soared by more than 16% in August as of this writing and as a result of a spike in geopolitical uncertainty, will climb even higher. Many strategists are forecasting a pullback in the broader stock market. However, the GTI VERA Convergence Divergence Indicator, which follows both positive and negative trends for the $200 billion digital currency, has signaled a buy sign as crypto enthusiasts have recently bet that Bitcoin could climb to $50,000 or even $100,000.
Market Turmoil Means Bitcoin Gains?
Bloomberg Intelligence analyst Mike McGlone explained that "Bitcoin should remain a primary beneficiary of growing demand for its store-of-value, quasi-currency asset properties," per a recent report by Bloomberg. McGlone adds that "plunging bond yields and rising stock-market volatility" should bolster Bitcoin. As trade tensions between the U.S. and China send shivers through the stock market, investors are increasingly turning to Bitcoin because they see it as a safe alternative. On Monday alone, Bitcoin rose by about 13%, per Bloomberg.
Even in spite of losses in the area of 70% in 2018 and the fact that Bitcoin has hovered around $4,000 for most of 2019 so far, some investors are incredibly bullish when it comes to the world's top cryptocurrency. A recent report by The Wall Street Journal highlights Bitcoin options traders who have predicted that the coin will reach a price of $50,000, and a July report by Bloomberg points to new call options allowing traders to wager that Bitcoin will reach a whopping $100,000.
Just because a small number of Bitcoin bulls have predicted tremendous gains does not mean that the cryptocurrency is free from risk. Indeed, Bitcoin continues to be plagued by volatility: when China stabilized the yuan on Tuesday after rapidly devaluing its currency the day before, cryptocurrencies as a group failed to maintain the big gains they had seen earlier in the week. Akbar Thobhani, CEO of SFOX Inc., suggested that Bitcoin is seen as a "store of value, similar to gold" which builds "positive momentum amid the 10% tariff announcements." When the markets stabilize, though, Bitcoin tends to falter.
Beyond a history of dramatic volatility, Bitcoin also carries numerous other risks. In May, the Journal pointed to a cryptocurrency exchange hack which resulted in the theft of $40 million in Bitcoin. Fraud is also a lingering concern for investors in the digital coin space.
What Comes Next
Bitcoin has made impressive gains in recent days, but investors should remain cautious about the cryptocurrency's ability to maintain that momentum going forward should the geopolitical situation stabilize.