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Bitcoin has slowed its roll since hitting 20,000. After surging 70% in two months, King Crypto is about 9% off the intraday all-time high.

It doesn't show signs of reversing just yet, but it is having some trouble breaking out through the 2017 record and that's notable. Bitcoin did in fact trade at an all-time record for a brief moment, but technical analysts like to draw lines with markers instead of pens for a good reason. Right now, the best way to describe the action is that bitcoin is testing its all-time high it hasn't broken out yet, and that means there is still some tension in this market.

In an article this weekend in Barron's, Niall Ferguson made the bullish case for bitcoin. He, like almost every other bitcoin believer I've ever spoken with, cites a critical piece of crypto canon:

You could argue, if you were a skeptic like my old friend Nouriel Roubini, that this is just another bubble. But the adoption of a new financial technology tends to be quite volatile, and each time Bitcoin rallies and then folds, it folds to a higher level than the time before.

In other words, bitcoin must trend higher. This is why the next move is so crucial. The bitcoin bible states very clearly that bitcoin needs to make a new high in this latest push after 2018's crash. Its already put in a higher-low, which is good, but failure to breach above 20k would be a major problem for the bullish bitcoin narrative.

It would also be a red flag to stock investors.

That's because bitcoin's strongest use-case is still as a gauge of risk tolerance in the marketplace. Even the most devout bitcoin believers will tell you to always be ready for a 10-20% pullback at any time, and that inherently makes it a risky asset, since most people cannot tolerate that kind of volatility. Bitcoin has the potential to one day be a store of value, and the believers argue this boom-bust cycle is a critical setup for that future. In my opinion, that future has indeed become more compelling lately. But the probability of it is still so low that we have to consider it a high-risk asset an effective lotto ticket for investors. Even if the odds of adoption doubled, say from 2% to 4% (dont hate me, coiners), it's still very low.

In this context, it's not surprising to see bitcoin trying to break through all-time highs, and having trouble, at the exact same time the Nasdaq NDAQ is doing the same. And equally no coincidence that this is all happening amid near-records in just about every gauge of investor sentiment or positioning right now.

So if 1) bitcoin fails to break out to new highs, it should make tech-stock bulls second-guess their own confidence. This most likely holds the other way around too if 2) bitcoin does take another leg higher, stocks are likely in the clear, too. If 3) bitcoin breaks down but stocks don't, it's likely a huge vote of confidence that the economic recovery is stable and strong. And if 4) bitcoin breaks out to new highs but stocks break down, that would be a huge event that I would argue makes bitcoin a must-own asset. More on that if we get there.

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Why Every Investor Should Be Watching Bitcoin - Forbes