Bitcoin's Momentum Appears to Be Holding After 3% Weekend Move Higher

As far as mission-critical cryptocurrencies are concerned, Bitcoin (CRYPTO: BTC) has to be the top token investors are paying closest attention to right now.

Whether that's because of Bitcoin's status as a portfolio diversifier for investors of all sizes and investment styles, or because of Bitcoin's importance to the functioning of the global economy, or to treasury companies and other corporations that hold Bitcoin on their balance sheets (including governments), Bitcoin's proponents are numerous. In other words, there are plenty of vested interests in keeping Bitcoin's price headed in one direction-higher.

And since Bitcoin is generally viewed as a correlated asset to others on the more speculative end of the risk spectrum (such as high-growth tech stocks), when the economy is booming, it's generally party time for Bitcoin investors.

That said, with sentiment waning of late, seeing Bitcoin dip back below the $90,000 threshold has some investors concerned. This weekend's move, which saw Bitcoin rally from a low of around $87,800 on Sunday to nearly $91,000 as of 4:00 p.m. ET on Monday (yielding a return of around 3.4%), is encouraging.

Let's explore what's driving this move and whether it can be sustained.

Is it all "animal spirits" at this point?

Source: Getty Images.

Those bearish on the value Bitcoin ultimately provides will drone on about the lack of real-world use cases for Bitcoin, and the reality that the percentage of overall transactions in the U.S. economy that Bitcoin facilitates roughly approximates zero. It's not really a store of value either-that thesis has been undermined by very high-beta moves in the market, with surges and plunges seen in other risk assets, also evident in Bitcoin (but to a greater extent).

There have been some bullish catalysts over the course of the past week, with several reports citing surges in capital inflows into Bitcoin as key drivers of this token's recent price appreciation, with others focusing on liquidations of bearish perpetual futures (derivatives) bets. Both factors do impact the price of Bitcoin and are worth following.

However, the most notable recent analysis I've read about Bitcoin, with its relatively high beta of more than 0.5 (for a "store of value" asset) compared to the Nasdaq, suggests to me that this is mostly a market sentiment reversion rally right now. (A beta of 1.0 suggests two assets move in lockstep, with 0 implying no correlation at all, so Bitcoin's beta coefficient suggests this asset is somewhere in the middle of this range).

The idea here is that if the market sneezes, Bitcoin catches pneumonia, and the inverse is also true. I'm not so sure the rest of this decade will turn out to be the "roaring twenties" as other pundits have described it, but many investors are treating Bitcoin as if that's the case. Perhaps this recent price action in Bitcoin is indicative of some more prescient realities underneath the surface that are worth considering.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.