Bitcoin Finds Support At $10,000, And Is Gaining Momentum For A Push Higher Towards The $12,000
Bitcoin is stuck in a rut... but that may be a good thing. As the top crypto by market cap, Bitcoin has been vacillating between $10,000 and $12,000 since late June, but signs are finally pointing to a break in the pattern or at least a short-term spike. Currently trading at $10,167 at press time, Bitcoin’s famed volatility seems to have cooled for now. But that stability could be crucial for Bitcoin’s next step.
What exactly is pointing to a break? One of the big indicators is Bitcoin dropping below the GTI Vera Band Indicator, which tracks up- and down-trends. The last four times this happened, Bitcoin quickly rallied. Not to mention that Bitcoin has established a significant support at $10,000. It’s been tested four times over the last week, and the Bitcoin price bounced higher each time. The short-term high at $12,316 still holds, for now, but a break above the $12,000 resistance would signal that a new cycle of an ascending trend in Bitcoin’s price has begun.
Is there anything to push Bitcoin up? Bitcoin, like a lot of cryptocurrencies, thrive on hype - and there have been few things as hype-making in the fintech world lately as Facebook’s Libra - a stable-by-design digital currency planned for release by Facebook. But things aren’t all rosy - Libra has drawn skepticism from both private parties (pointing out that it isn’t really a crypto) and government regulators, especially in the US. It’s a planned topic of conversation between the US lawmakers and Swiss authorities (where Libra will nominally be headquartered). If the results are positive, it may generate more interest in crypto and Bitcoin, driving growth in fintech as a whole, and in the Bitcoin price, in particular.
What if this stability becomes the new normal? That may not be a bad thing, according to the Facebook-feuding Winklevoss twins. In fact, stability might just be what the doctor ordered for the cryptocurrency - especially as it’s looking more like digital gold than greenbacks. Though, Bitcoin is still a long way off from being as stable as gold. But Bitcoin’s volatility has dropped to the lowest level since June, a definite sign of growing maturity for an asset that is often considered risky (though the Winklevoss twins disagree.)
Wut We Think: Whether or not Bitcoin becomes a safe haven or digital gold is ultimately up to time and perception, but in the end that’s not as convincing as the price. And even though the price has been consolidating for a while, Bitcoin isn’t content to remain in the doldrums for long. A good sign is the amount of interest in buying Bitcoin at $9,000 and $10,000 - since the support at $10,000 has held over the past two weeks, buying pressure has a good chance of sending the price spiking past the $12,000 resistance.
Stocks Slump, Bonds and Bitcoin Rally as China Plans to Add $75 Billion Worth of New Tariffs
The US-China trade war keeps raging on... with China recently threatening to impose its own counter-tariffs. Namely, China called for imposing up to $75 billion in new tariffs on goods that include soybeans, cars, and oil - key US exports. Key indices, including the S&P 500 and the Dow Jones Industrial Average both lost about 1% immediately following the news, with both trading 1.5% lower than the last 5-days open. In response, US President Donald Trump tweeted an ‘order’ for US businesses to stop working with China.
So what’re these latest tariffs about? Basically, it’s a tit-for-tat response to Trump’s threat of tariffs, though the US side has been delayed until at least September (but the latest proposed US tariffs would pretty much hit all imports from China.) The Chinese tariffs will range from 5% to 10% on soy, oil, and other imports - but the biggest hit will be automakers, which will see 25% tariffs applied to their cars. Ford, BMW, and Mercedes export about a quarter of a million cars to China every year.
What’s this about an order? Trump tweets - a lot. And a lot of those tweets are, charitably, not entirely in line with US jurisprudence. Case in point - a tweet in which Trump ordered US businesses to stop working in China. But Trump doesn’t have that authority. The act cited by the President doesn’t grant him the authority to close factories in China, but his comments did send stocks sliding.
Is there any upside to the trade war? It’s a common saying that ‘No one wins in a trade war’, and that is mostly true for business in the real economy. For traders and investors, safe havens like gold, Bitcoin (which gained intraday after the Trump tweet), and the Japanese yen have all risen. In addition, the countries like Vietnam, Thailand, and Malaysia have all seen an upsurge in interest as US firms look for new places to move their factories.
Wut We Think: For crypto traders, a trade war isn’t the worst thing in the world. Crypto is pretty insulated from most wider geopolitical shocks, which means that investors will be flocking to crypto, in general (and Bitcoin, in particular), as a safe haven, giving Bitcoin a much-needed boost in price over the medium-term. And, since a calm resolution doesn’t seem to be in the cards any time soon, expect even greater interest in Bitcoin as tariffs are applied and tensions rise.
Is The US Economy Headed to a Recession? What This Means for Bitcoin?
Recession for the United States may be just around the corner... despite healthy growth for US businesses. There are a lot of signals pointing that way - from US-China trade war escalation to Brexit uncertainty and a lot of other stuff in between. But despite a G-7 meeting last week, it seems that trade and economic tensions will continue to grow. The fact that US President Donald Trump called Jerome Powell, the US Federal Reserve Chairman, a bigger enemy than (Chinese President) Xi Jingping - probably isn’t helping defuse worries.
Why is Trump targeting the Fed? It’s looking like Trump wants the Fed to act more aggressively by pursuing an easy monetary policy in supporting the White House during the trade war. Trump has repeatedly talked about the need for a weak dollar, and his view is that the Fed’s 25 basis point cut wasn’t aggressive enough (Trump wants 100 points.) This is despite Powell committing the Fed to ‘act as necessary to support the expansion’, which usually points to another rate cut down the road.
So is the recession really going to happen? It’s not a guarantee, but the longer the trade war stretches on, the more casualties it’ll have and the more effects will trickle down to US consumers. And that may be enough to turn the recession global, especially with US GDP growth contracting by a full percentage point - that’s not even mentioning no-deal Brexit uncertainty, a 0.1% German GDP contraction, and a Chinese debt crisis. On the other hand, job growth in the US has been high, and unemployment is at a low, so it remains to be seen if trade worries finally hit the average US worker.
If a recession does hit, what then? Well, for starters, it probably won’t be as bad as the Great Recession of ‘08. Unlike in ‘08, this recession isn’t being caused by systemic risk, but by hype and geopolitics - a resolution to any of the major looming threats - Iran, Brexit, trade - could be enough to bring confidence back to the markets.
Wut We Think: The chance of a recession has risen, but it’s still under 50%. And with the US heading for a possibly historic election in 2020, the president Trump may not want to push the country (and its voters) into economic crisis just as the campaign season heats up. But even if it does, there are a few outs - Bitcoin, for one, doesn’t have much of a link to US manufacturing performance or GDP growth - as well as gold and bonds will probably grow. The biggest risk of recession is the fear of recession itself, which tends to create headlines on its own. But even if that’s the case, Bitcoin will most likely appreciate because of its increasing perception as a hedging instrument against geopolitical and macroeconomic risks. And, while investors are fleeing from equities, some of the financial flows will be allocated to Bitcoin.