The time based technicals are mixed; they suggest more upside
The U.S. level of debt : GDP is a driver, as are the turbulent final days of Trump
Many once sceptical voices are now becoming converts
“…You gotta take it up a level and go up higher
Put more fuel in the tank and turn up the fire
Come on, and take leap into your destiny
And come on up, come up, come up with me
We’re going up, up up,… ”
Writing an opinion piece on Bitcoin against the U.S. Dollar is setting oneself for a hiding to nothing.
Despite the warnings we all know about assets that rise in an exponential or parabolic manner, the lyric above seems to capture the mood that has characterised the recent market for this cryptocurrency.
Figure 1 BTCUSD Long History
Figure 2: Technical Sentiment
Source: www.investing.com and Spotlight Ideas
The technical sentiment as in Figure 2 implies there may be some near-term selling, however, the signals suggest that this will soon yield the power to a renewed bout of Bitcoin buying.
Surges before in the price of the best-known crypto currency seem to have fizzled out just as uninformed members of the public were lured in by the prospect of getting rich quick as they chased new “ATH”, all-time highs.
Many were badly burned as not all can afford to be “HODLers” i.e. Bitcoin holders.
Hodl often written HODL) is slang in the cryptocurrency community for holding the cryptocurrency rather than selling it. … A person who does this is known as a Hodler.
However, as if to refute another financial or economic law, could it really be different this time?
One reason to say this is that we are now seeing many leading players on Wall Street joining in. For example, BlackRock say Bitcoin could be a global market. Morgan Stanley have suggested that as U.S. debt to GDP has grown from 55.6% in 2000 to 91.2% in 2010 (as the GFC raged) to now where it is measured at 106.9% following huge COVID-19 stimulus spending. This will rise further as the Democrats will control all offices of the federal Government from January 20 and so Biden’s spending binge will be unrestrained.
Also, after the ridiculous and shocking events of January 6th, even without his Twitter account, who knows what mayhem the big and belligerent voice 45th President could cause in his last days in office. When the U.S. President is branded a clear and present danger to his own country, it is hard to hold its currency as Trump tramples on trust.
However, not all opinions are equal and the voice that has my caught attention is that of the leading bank J.P. Morgan Chase.
In September 2017, Jamie Dimon the CEO said:
“…If we had a trader who traded Bitcoin, I’d fire him in a second for two reasons. One, it’s against our rules. Two, it’s stupid,…
…You can’t have a business where people are …going to invent a currency out of thin air …It …won’t end well … someone is going to get killed …and then the government is going to come down …on it. … It’s a fraud…”
Hmm…on January 5th analysts at this fine institution released research to state their great minds believe that the currency’s price will jump to USD146,000 in the long-term.
(I put that figure in bold font to capture your attention)
Embrace the volatility…if you dare
The technical picture suggests BTCUSD is a strong buy and yet dig deeper in the granular data and one finds that the Williams %R, (Williams Percent Range) sits at -1.896 saying that BTCUSD is tending toward being overbought.
Similarly, short-term moving averages defined as the 5-day or 10-day (MA5 and MA10) also both imply that in their simple form BTCUSD is overbought.
Should you buy Bitcoin?
The answer as to whether one should buy now, or wait, or not buy at all is one’s own decision. I certainly do not think I would have the stomach to run shorts in the market.
When faced with a dilemma, I like to paddle my feet in a rive of reality. So, one question I keep returning to is “What is meant by money?”
An accepted medium of exchange
A standard of deferred payment
A store of wealth or value
A unit of account
Bitcoin can answer “Yes” to the first two questions; however, the volatility makes the answer to the third question uncertain and as for the fourth…we just do not know who stands behind Bitcoin.
There is no government or central bank and whilst some may say that is the whole point the truth is that Bitcoin is too lumpy to be a smooth and efficient medium of exchange. Perhaps we need to get the tinsnips out and trade in bits of Bitcoin.
Regulation; regional variation
Around the world, governments and central banks have been keeping a close eye on cryptocurrencies. They will not just stand by and let unaccountable financial mediums of exchange challenge the current dominance of fiat money.
It is therefore no surprise to learn that there are ongoing attempts to regulate the crypto asset market.
The fact remains that to succeed there needs to be global coordination from regulators and legislators around the world to keep ahead of the curve.
The U.S. is leading the way in terms of a sophisticated enforcement of crypto regulations. However, the approach does appear fragmented as some states are passing easy laws to attract Bitcoin operations and finance. N contrast, those states that have established financial centres e.g. New York, Illinois and California passed restrictive legislation regarding crypto assets and investment, or have suggested that this will be their approach in the future.
The U.K. has taken bolder steps in a more unified manner in relation to banking approvals. When it comes to tax treatment, the position is becoming much clearer in both jurisdictions.
As the U.K. has now left the EU and ended its transition period when EU law still applied there is greater scope for the U.K. to take a lead and establish a unique model of crypto regulation, not tightly linked to the EU approach.
Figure 3 shows that on Friday, January 8, 2020 the level of BTCUSD started to lose momentum as 41,702 proved to be a resistance. There is a risk of retreat to 38,000. This could be met by a violent jump higher particularly if there is any more trouble in the U.S. as Inauguration Day approaches.
I have not bought Bitcoin; you may say I am a fool, but as old minds of the market say:
“…if you do not understand a product…do not buy it…”
Well, I like to think I do understand it, but it is the Blockchain that I am interested in…not a gun shoot in the financial wild west.
The next big test for BTCUSD is breaking over 45,000…and then we can contemplate 50,000 … 55,000.
I will not chase this odd market; I like assets where I can kick the tyres and have the drains up. That said, if you do, good luck but never forget, “Caveat Emptor”
BUY - rate is expected to increase, i.e. the first currency gains value against the second currency.
SELL - rate is expected to go down, i.e. the first currency is expected to lose value against the second currency.
The BTC/USD pair is the most popular cryptocurrency/fiat pair, and as such, it is definitely a “major” for those involved in the crypto industry. For the mainstream financial industry though, it is more of an exotic pair, which is slowly but surely gaining in importance. Some people view bitcoin as more of a digital commodity, better suited for the role of value-storage than that of currency. Others still see the money of the future in it. Whatever the case, one thing is certain: together with other cryptos, bitcoin has seen a massive, and apparently sustainable value-growth lately.
Although it has been conceived as virtual money, bitcoin is unlike the fiat currencies of nowadays, in every way. First off: it is decentralized. No one owns bitcoin and no entity can exert complete control over it. Those with the most control over the course the virtual currency takes as it navigates its challenges, are the miners: the people responsible for keeping the bitcoin network running. All bitcoin transactions are peer-to-peer, meaning that there aren’t any intermediaries involved in them.
Every bitcoin transaction is registered in a public distributed ledger, called blockchain. The blockchain is maintained and updated by miners, who use specialized hardware to complete these tasks. For their efforts, they are rewarded with bitcoins. Only 21 million bitcoins can ever exist, and more than 16 million have already been mined. Of these, a few million were lost, during the early years of the currency, when one BTC was only worth a few cents and people were careless with their virtual money.
Recently, with the massive uptick in bitcoin’s value, using its mBTC (milibitcoin = 1/1,000 BTC) subdivision has become practical. Satoshi is the currently accepted smallest subdivision of BTC. One satoshi is worth 1/100,000,000 bitcoins.
The USD is the dominant currency of the world economy. It is the most popular reserve currency, it is the most traded currency (apparently, 88% of the trading volumes generated by the Forex market involves the USD one way or another), and it is the currency used to determine the value of certain commodities, such as gold and oil.
As a matter of fact, the USD is the primary fiat currency against which the value of most cryptocurrencies is measured.
The USD is controlled by the Federal Reserve, which tweaks its value by manipulating the interest rates. An interesting fact about the USD is that there’s more of it held outside the US, than within the country. The USD is after all, the national currency of several other countries too.
The long-term outlook for the BTC/USD pair is a clearly bullish one, according to most experts. The very nature of the two currencies points to such a conclusion too. While the USD is obviously an inflationary currency, the BTC is a deflationary one. While the upside for BTC is certainly there, no one really knows how far up the BTC/USD can/will go. Some see it peak at $100,000, while others think that $1 million is fair game too, eventually.
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
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