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There was a clear and untouchable outperformance across the risk spectrum this past session: Bitcoin. The cryptocurrency may find next week's futures contract launch justification, but this crazy pace of climb is clearly speculatively motivated.

Talking Points:

  • Bitcoin is up 7 consecutive sessions covering an incredible 60 percent-plus rally
  • Where the cryptocurrency hit headlines for nearing $20,000 - the move was exchange specific at Coinbase as others topped near 16,000
  • While there are particular points of value to Bitcoin, its wide divergence to other cryptocurrencies speaks to speculative bubble

See how retail CFD traders are positioning in Bitcoin intraday using theDailyFX speculative positioning data on the sentiment page.

Already running at an incredible pace, Bitcoin managed to find a gear that would be extreme even in more universally volatile conditions. And, what we are experiencing across the financial system is far from even moderate levels of activity. It would be barely turn heads to state that the favored cryptocurrency hit a record high this past session or even that it moved more than 10 percent intraday. But, the stats on Bitcoin's activity this past session are extreme. After clearing $14,000 with a modest pace in progress, the market went on to surpass the next few $1,000 marks within hours. With this eighth consecutive daily advance matching the longest run back to October 2015, we have also seen the biggest rally over that same period in at least three years.

Understanding what is driving this epic climb should be crucial to our conviction in its persistence as a trend. I believe strongly that this run is being clearly driven by speculative appetite. We can establish this via a range of considerations. Beyond the sheer intensity of the run we have seen thus far that tends to break the logical assessment of reasonable investors' search for balanced risk/reward, we have an extreme disparity between exchanges. The headlines were trumpeting the currency's rally to within inches of $20,000 intraday Thursday, but the Bitfinex exchange and aggregate pricing indexes register a topped out just shy of $16,000 through the session's peak intensity. That disparity reflects a haste that targets momentum over value. Naturally, industrious traders would attempt to arbitrage across exchanges, but the reliability of pricing along with fees and access are likely too unreliable to find price stability.

Another factor that points to speculative over value motivation this past session was the fact that Bitcoin's incredible rally was the complete contrast to the other major cryptocurrencies. Ethereum, Ripple, Litecoin and others were holding range or even falling through Thursday seemingly finding little spillover benefit from Bitcoin. That is a sign that the appetite is not for digital currencies that will redefine the financial system and should be priced accordingly. Some of Bitcoin's peers are far better for facilitating day-to-day transactions which is what the entire space is looking to accomplish to gain its foothold in the world of finance. There is considerable evidence to suggest what we are seeing is a bubble. However, just because a bubble - prices that are unsustainable on traditional valuations without the express contribution of outside forces such as blind speculation - is present, doesn't mean that its pop is imminent. From tech shares in the late 1990's to housing prices in 2007, there have been plenty of extended markets that have gone to defy even the most lofty extremes a reasonable mind would project. Nevertheless, we should be mindful of what we intend to get involved with. We take a look at Bitcoin's extreme acceleration in today's Quick Take Video.

Bitcoin Manages to Accelerate an Already Neck-breaking PaceBitcoin Manages to Accelerate an Already Neck-breaking PaceBitcoin Manages to Accelerate an Already Neck-breaking PaceBitcoin Manages to Accelerate an Already Neck-breaking Pace

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