Bitcoin is having a bit of an identity crisis, once again.
For nearly all of the past three years it's strictly been a risk-on/risk-off asset. Its tight correlation with the Nasdaq was useful to identify intraday turning points in sentiment but it seemed to destroy arguments that it was an uncorrelated asset.
At least it did until this month. Bitcoin surged in March as the security of the global banking system came into question. The 40% jump showed it could be an uncorrelated asset and a hedge once again, at least in a period of moderate financial stress.
Intuitively, the reasons it rallied his month make sense. Money was flowing out of banks in search of a home. Much of it moved to larger, safer banks and other funds moved into the safety of bonds or gold but bitcoin captured a large chunk as well. Its strength in this period breathed new life into it as an asset class even with US regulators tightening the screws.
But for the next marginal dollar, what is bitcoin?
Banking stresses are declining today and if they continue to decline, does the air come out of bitcoin? At the same time, if the banking crisis fades, then presumably risk assets will also rebound. So there's a push-and-pull brewing and that's an uncomfortable position.
I hate to be in a place where I predict what's coming next and still get the trade wrong. I believe banking worries will quickly fade but I don't know if that's good or bad for bitcoin.
What the chart says
One thing that is inarguably great about bitcoin is that it runs with the technicals. The chart is interesting here as it consolidates around $27500 following a strong run. I wouldn't take that as a sign that a retracement is looming. Today it was hit by regulatory headlines and banking calm yet has only fallen 2%. A retracement down to $25,300 and retest of the February highs might be constructive as that was a critical resistance zone before it broke this month. Buying close to there would offer some support and a potential spot for a tight stop.
Overall though, this isn't an asset that's screaming for involvement, though that might depend on your view of what will happen with banks next.