Bitcoin extends rally with chart watchers eyeing US$20,000

BITCOIN is in rally mode once more. Whether it's uncertainty from the US election, the future of the pandemic or fear of missing out, the cryptocurrency is at the highest level since January 2018. Bitcoin jumped as much as 9.2 per cent to US$15,301 as of 11.27 am on Nov 5 in New York.

Adding to the frenzy, the US said law enforcement seized thousands of bitcoins, valued at over US$1 billion, on Nov 3 that were linked to Silk Road. The action represents the largest seizure of cryptocurrency in the history of the Department of Justice.

The digital currency has been benefiting from high-profile investments from the likes of Square Inc and Paul Tudor Jones. JPMorgan Chase & Co's JPM Coin was reportedly used to make a payment for the first time. Proponents argue bitcoin can be a diversifier in times of uncertainty, so events like lockdowns across Europe or delays of US election results could be fuelling its rise.

After taking out the June 2019 highs at US$13,800, the next resistance is around US$20,000, Fundstrat Global Advisors LLC technical strategist Rob Sluymer said in a note last month.

The cryptocurrency world is, of course, famously volatile. Bitcoin has made parabolic runs upward before, notably December 2017 and mid-2019, before major tumbles. And many strategists and investors are sceptical. Empire Financial Research's Whitney Tilson said in an email on Wednesday that he still regards cryptocurrencies as "a techno-libertarian pump-and-dump scheme" and recommends most investors avoid them.

Still, some see the cryptocurrency's march higher as poised to continue.

"Previous bitcoin resistance at about US$10,000 may transition toward US$20,000 in 2021," said Mike McGlone, commodity strategist at Bloomberg Intelligence. "Certain supply leaves demand as the primary price metric, and most indicators remain positive."

The US is suing for the forfeiture of more than US$1 billion in bitcoins it says are linked to the criminal marketplace Silk Road it shut down seven years ago.

The thousands of bitcoins, which the Justice Department seized on Tuesday, represent the largest cryptocurrency bust the government has ever made, it said on Thursday.

"The successful prosecution of Silk Road's founder in 2015 left open a billion-dollar question. Where did the money go?" the US said in the statement. "Today's forfeiture complaint answers this open question at least in part."

US authorities seized the bitcoins from an alleged hacker who had gained access to them, identified in the statement as Individual X. Researcher Elliptic flagged that the crypto was on the move on Tuesday.

The case began when agents of the Internal Revenue Service Criminal Investigation Division identified 54 previously undetected bitcoin transactions executed by Silk Road, the US said. The transactions involved funds the agents traced to a bitcoin address through which they were able to pinpoint the alleged hacker, according to the Justice Department.

The bitcoin address is the world's fourth-richest, according to a BitInfoCharts ranking.

The Silk Road website, which the US called "the most sophisticated and extensive criminal marketplace on the Internet", used bitcoin to peddle everything from drugs to murder-for-hire until it was shut down by US agents in 2013.

Operated by Ross William Ulbricht from 2011 to 2013, Silk Road used Bitcoins to generate the equivalent of US$1.2 billion in illicit sales and reap US$80 million in commissions in less than three years, according to court documents. Ulbricht was convicted in 2015 by a New York federal jury of seven criminal counts, including conspiracy to distribute narcotics and money laundering.

Crypto researcher Chainalysis said that it assisted law enforcement in tracking down the funds, lending its tools to help identify the largest cryptocurrency wallets with connections to Silk Road. Silk Road accounted for nearly 20 per cent of total Bitcoin economic activity at its peak in 2013, according to Chainalysis data. BLOOMBERG