This year has seen a massive resurgence of crypto optimists. The 3rd halving that happened in May propelled investors into the market and the COVID-19 pandemic trashing the economies only added more credit to crypto currencies as an alternative investment to FX. The end of the year became similar to 2017 scenario as everyone jumped on the bullish train. The biggest news comes from the governments and Investment Funds around the globe showing more and more interest in crypto’s and taking direct steps to capture the market.
China has seized £2.48 billion in Bitcoin as the nation continues to build its mining capacity and the recent move could allow Beijing to “dominate the global economy” of the future, according to crypto pioneer Max Keiser. They have done so through South Korea mining exchange and are giving clear signs that the Chinese government is seeing the potential of Bitcoin to destabilise the status quo of the US dollar. China is currently leading in Bitcoin mining, using cheap renewable energy and the vast resources to capitalize in this booming market. Effectively, China could already own 1% of all bitcoin on the planet. US Secretary of Treasury Steve Mnuchin is planning to make a new regulation regarding self-hosted crypto wallets according to reports from the White House.
The Guggenheim Funds Trust, which has around $300 billion in assets, will invest over half a billion US dollars into GBTC (Grayscale Bitcoin Trust). They will become the largest company to date to buy Bitcoin. Grayscale Investments has $10.8 billion in cryptocurrencies under management, they are the world’s largest crypto asset manager. PayPal is now including crypto’s into its buying and selling options. People like Jack Dorsey, Paul Tudor Jones and other big names are putting more and more trust into the future of cryptocurrencies.
Weekly chart analysis (BTCUSD)
Looking at the weekly chart of Bitcoin, we see great technical momentum reaching its peak point. This move was expected this year based on the 3rd halving that happened in May, signalling another jump in prices. The strength of the cryptocurrency market was demonstrated this year as even the global pandemic could not shake off the astounding trust investors have in crypto’s. The final push came from PayPal announcing Bitcoin buying and spending services. Now that governments are piling in as well, it only adds more fuel to the fire. A break and retest of the massive symmetrical triangle took us all the way to all-time highs and price is now consolidating before the next move. It is a welcome correction, giving us more content for proper analysis. Price pulled back around $3000 in a matter of hours, creating a big spinning top candle on the weekly chart, signalling consolidation even more. This correction was equal to $50 billion in market value of world’s cryptocurrencies wiped out. But price is nearing highs again over the weekend. Currently it could result in a bull trap, but traders appear cautious, it seems that maybe investors learnt from the 2017 boom and bust.
Comparison to 2017
A serious case of déjà vu this year. In 2017 this is exactly how it started. A massive boom in November and all the way till just before Christmas saw Bitcoin price hit $20000 mark. The concern this year is that we are already close to the all-time high, so before Christmas profit-taking begins, we have enough weeks to make new all-time highs and then collect the reward. According to some industry specialists, current consolidation is a cool-off period necessary to make new highs before the year ends. Personally, I believe that we are entering an interesting period with economies being hit right, left and centre, but the stock and cryptocurrency markets showing the strongest rally. The Roaring 20’s of the last century had a similar flow to them.
The dichotomy between cryptocurrencies and fiat currencies is greater than ever before. 2020 pandemic hit on the global economy shook an already fragile and heavily indebted financial system. Central Banks have been busy printing money, creating ripples for future inflationary problems that could be insurmountable. The current financial system has been circulating the drain since 2008 crash, and without radical changes, a fatal outcome is inevitable. This is where cryptocurrencies come in to potentially fix the system if the ruling parties find a compromise on how to regulate them. This is great news for all crypto investors since currencies like Bitcoin are here to stay. This will involve a lot of volatility, but long-term projections are certainly positive.