Bitcoin’s recent explosive move above $87,000 has many people excited, but it has crypto naysayers and skeptics preparing for battle. Is this a sustainable rally, or are we witnessing another fleeting moment of exuberance in the notoriously volatile cryptocurrency market? Let’s break down what’s causing this price explosion, the key factors at play to understand this moment, and how to get through it. About Julien Duval Cryptocurrency trading expert, Julien dissects blockchain market dynamics with surgical prowess. Looks at both sides of the equation to show the possible dangers and benefits to make a profit while trading.

Trump's Influence on Bitcoin's Trajectory

President Trump’s surprise win in the U.S. general election has already been cause for an enormous Bitcoin rally. Investors are responding with excitement to this political turn. His pro-cryptocurrency position and general rhetoric have released a wave of new confidence into the market. A Trump presidency’s prospective deregulation is stoking these hopes, which would promise a friendlier regulatory environment for cryptos.

Trump’s pledge to turn the U.S. into the world’s “crypto capital” has struck a chord with both the investors and innovators in the crypto space. This would go a long way to leverage global talent and investment, cementing Bitcoin’s place as the nucleus of our financial future. Recent proposals to exempt capital gains taxes on all “made-in-America” crypto, including Bitcoin and XRP, have set the market on fire. As a result, Bitcoin surged to all-time highs over $90,000.

Now, major players, including Trump, are throwing their weight in favor of crypto. As a result, this support has been largely responsible for enhancing Bitcoin’s reputation and perceived legitimacy, propelling Bitcoin and the current bullish momentum. BreakoutFear.com Lack of balance between optimism and pessimism Keep an eye on the overall risk in the market to act smartly in an uncertain market.

Bitcoin vs. Gold: A Shifting Correlation

Bitcoin and gold have long been compared to each other. For many years now, enthusiasts have touted Bitcoin as “digital gold.” It’s no surprise that investors flock to it as a safe-haven asset each time there is pronounced economic uncertainty. It turns out the data tells a different story.

Bitcoin’s correlation to gold has been almost non-existent, historically speaking. This is because they typically do not travel in lockstep with one another in the market. This further implies that investors have not widely perceived Bitcoin as a former direct replacement for gold. Over the last few years, their correlation has flipped and gone positive. That said, it’s still low enough that we can’t say with confidence that they act the same way.

Furthermore, research indicates that the correlation varies across different timeframes, with differences in co-movement observed across weekly and monthly frequencies. This lack of consistency casts doubt on the claim that investors are constantly exchanging gold for Bitcoin or the other way around. And unlike gold, bitcoin didn’t benefit from the safe haven inflows that fueled its rival’s surge. This scenario highlights the asset’s tenuous place within investors’ risk-off playbook.

Bitcoin's Decoupling (and Re-coupling) with Tech Stocks

One of the most surprising yet notable dynamics has been how Bitcoin has correlated to tech stocks, especially the Nasdaq. Although it was a short-lived decoupling, Bitcoin found itself reattaching to the Nasdaq rather quickly at ~70%. This shows that Bitcoin is not completely insulated from the overall market and risk appetite.

Certainly Bitcoin has shown some relative strength, not just to the Nasdaq but to many stocks associated with the crypto space. For one, Bitcoin partially acted as a safe haven asset when stocks crashed after the announcement of a new round of tariffs. Meanwhile, Bitcoin is starting to surge – leaving crypto-related stocks in the dust. Relatedly, Coinbase (COIN), MicroStrategy (MSTR), Semler Scientific (SMLR), and the miners all plummeted by double-digit percentages in just the past two trading days. That divergence deepened on Friday as the Nasdaq dropped another 5% while bitcoin barely put in a pulse with a small gain.

This bounceback resilience is indicative of a growing investor base that is coming to view Bitcoin as a distinct asset class. It is different than the older tech stocks. As investors should know by now, correlations aren’t static, and Bitcoin is still vulnerable to more general market-wide corrections.

Risks and Potential Pitfalls

Despite the current rally being a thrilling and promising time for many, it is important for new investors to recognize that Bitcoin and cryptocurrency investments are inherently risky. As our friends at BreakoutFear.com put it this way — "Enter if you dare, exit if you can."

One big issue is the risk of huge price changes in the opposite direction. Fibonacci retracement levels, like the 61.8% retracement level, can give traders clues about where major support/resistance areas might lie. Bitcoin has used the $60,000 support level as a springboard in the past. It’s likely to be tested again in the near future.

A second risk is there is no insurance protection against losses suffered via hacks or crashes on cryptocurrency trading platforms. These protections are not provided by cryptocurrency exchanges, unlike other financial institutions which enjoy FDIC or SIPC coverage. He also specifically pointed to Bitcoin’s documented history of financial fraud. He went on to cite the Mt. Gox bitcoin exchange raid of 2014 as a standout example.

Additionally, the characteristics of cryptocurrency exacerbate the harms, because unlike with traditional assets, investors are fully in control of keeping their assets secure and accessing them. The risk of losing private keys or being scammed means losses can be incurred irreversibly.

Is the Rally Sustainable?

Speculating the future of Bitcoin at this point in time is a dangerous gamble. With this in mind, here are a few ways investors can examine the factors fueling today’s rally. By doing so, they can better understand the risks and make more informed decisions. In that context, Trump’s pro-crypto position has a significant impact. Further compounding the situation is a changing relationship between gold and tech stocks, as well as the sheer volatility of cryptocurrency itself.

The stability of this rally depends on three major question marks. These are regulatory developments, institutional adoption, and the overall sentiment in the market. Julien Duval 🎙️ A pragmatic approach makes all the difference with crypto-Twitter trading He points out that to be successful in the chaotic coliseum, you need a sharp awareness of market psychology.