Bitcoin was lower, pausing a powerful rally that has seen the largest cryptocurrency jump 25% in October to the highest levels since June 2019. Traditional financial-media outlets like Bloomberg News were writing about it. 

Prices appeared to hit resistance just below $13,900, close to last year's high. But analysts said that if the level is breached, there appear to be few brake points before the 11-year-old cryptocurrency ascends to $14,000 or beyond. 

"Between the levels of $14,000 and $20,000, there is insufficient price data to single out any specific points of resistance," Mati Greenspan, founder of the foreign-exchange and cryptocurrency research firm Quantum Economics, told subscribers in a newsletter. 

In traditional markets, European stocks dropped to a five-month low and U.S. equity futures were declining, amid investor concerns about rising coronavirus case loads. Gold weakened 0.4% to $1,900 an ounce. 

Bitcoin's recent rally as U.S. stocks floundered has simply widened the cryptocurrency's outperformance compared with traditional markets. As more investors tune in, the expanding gap could become a self-reinforcing trend. 

Following Tuesday's price surge to a new 2020 high around $13,700, bitcoin is now up 90% for the year to date. That puts the cryptocurrency well on pace to exceed last year's 94% gain.

It's also far ahead of the Standard & Poor's 500 Index of large U.S. stocks, where a recent slide has trimmed the year-to-date gains to just 5%, after a 27% rise in 2019. 

Many big institutional investors, such as pension funds, are under pressure to hit annual return targets of 7%, and with stocks now faltering and bond yields close to historic lows, they're casting about for alternatives. Bitcoin's track record alone might be enough of a sell, but the 11-year-old cryptocurrency also represents what could be the beachhead of a brand new, state-of-the-art financial system – the digital rails, as the crypto-market ecosystem is described by some industry executives.

Then there's the theory among many investors that bitcoin's fixed supply makes it a useful hedge against central-bank money printing – yet another compelling narrative at a time when top authorities from the Federal Reserve to the European Central Bank and International Monetary Fund say massive stimulus is needed to keep the global economy from faltering. As highlighted in this column earlier this week, even analysts for the once-naysaying JPMorgan Chase, the biggest U.S. bank, are now opening discussing bitcoin's potential upside.  

"Every major institution is re-looking at it right now," Matt Hougan, chief investment officer of the cryptocurrency-focused money management firm Bitwise, told CoinDesk in a phone interview. "There's lots of pings in my LinkedIn inbox." The San Francisco-based firm announced Wednesday that its assets under management recently crossed above $100 million for the first time.

According to Hougan, there are a few key differences now from prior bull runs in bitcoin, such as in 2017 when the cryptocurrency's price shot to up to about $20,000. 

There's been a rapid explosion in the industry's support infrastructure, from the development of regulated asset custodians to more reliable pricing feeds and more recently U.S. officials' move to explicitly authorize banks to provide services to cryptocurrency companies. Last week's move by PayPal to let users buy bitcoin offers a new seal of approval from an established company along with an incentive for other big financial firms to follow suit, in order to avoid getting left behind. 

Notably, Bitwise has repeatedly failed in its years-long efforts to win approval for a bitcoin exchange-traded fund. But Hougan said his firm has found a growing and welcoming cadre of financial advisors looking to steer money into its cryptocurrency investment funds, since they're among the few assets having any major positive impact in 2020 on clients' portfolios.

"We're reaping the harvest of two years of building infrastructure in this space," Hougan said. "It's no surprise that we're hitting multiyear highs." 

Digital-asset traders are so familiar with bitcoin's infamous price swings that such bullishness can sometimes sound fawning, breathless, credulous. But right now it's not just crypto money managers selling the story; bitcoin is getting a shot of credibility from its own market performance.

Bitcoin has decoupled from stocks this week. Prices narrowly missed the June 20019 high of $13,880 early Wednesday and were last seen at $13,550.

The minor pullback could be attributed to the overbought conditions signaled by the above-70 reading on the 14-day relative strength index (RSI). The 14-week RSI has also crossed above 70.

An overbought reading does not imply a bearish reversal. That said, it often yields a temporary consolidation or pullback similar to the one seen in May and July.

Dips, however, could end up recharging bulls' engine for a stronger rally, as fundamental indicators such as market value to realized value (MVRV) Z-score, which measures market value's deviation from realized value to assess undervalued and overvalued conditions. Right now the indicator suggests that bitcoin is far from overvalued and has plenty of room to extend the sharp rally from $3,867 to $13,800 seen over the past 7.5 months.

See Also: MVRV & SOPR: Insight into Investor Sentiment

The MVRV Z-score, currently at 2.12, is hovering at two-year highs, according to data source Glassnode. That's still well below the 7.0 score at which an asset is considered near a top.

All things considered, the path of least resistance for bitcoin remains to the higher side and bigger gains look likely albeit after minor consolidation.

– Omkar Godbole 

Read More: Is Bitcoin’s Rally Overstretched? This Key Indicator Says No

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