After beating the overall market’s return in 2019, bitcoin (BTC-USD) is off to its hottest start to the year in nearly a decade.
Rising nearly 30% in January to top $9,000, the world’s largest cryptocurrency by market cap is now trading above its 200-day moving average — a significant signal for more gains ahead, according to Fundstrat Global Advisors Managing Partner Tom Lee.
Interestingly, bitcoin’s surge to start the year has come at a time when fears over the spread of coronavirus across the globe has rattled equities in the U.S. and abroad. Lee estimates that to be further support for the theory that bitcoin is increasingly being seen as a safe haven asset, similar to a digital gold. Indeed, over the past three months, bitcoin’s correlation with the S&P 500 has flipped from positive 13% to negative 10%, indicating more market volatility could continue to carry bitcoin higher.
“These geopolitical events including coronavirus and geopolitical tensions really improve the use case,” said Lee in a new interview with Yahoo Finance’s YFi PM. He also highlighted that the cryptocurrency has historically traded higher 80% of the time after notching the technical feat of trading above its 200-day moving average and averages more than a 190% return after eclipsing the technical mark.
“Anyone who’s a trend follower knows when you’re above your 200-day [moving average] you’re back in a bull market,” Lee said. “Whenever bitcoin breaks back into its 200-day, its average six-month gain is 197%, so we’re sort of talking about a levitation taking place.”
According to Fundstrat research, that average six-month performance would compare to the modest 10% gain bitcoin averages when trading below its 200-day moving average.
“It’s a good time to look at crypto,” said Lee.