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Bitcoin Near $16,000 after Powell Keeps Rates Low, Commits Infinite-QE

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The price of a single Bitcoin [almost] reached $16,000 as traders assessed a combination of supportive macro catalysts.

One of them was the Federal Open Market Committee’s (FOMC) November meeting. On Thursday, the Federal Reserve Chairman Jerome Powell reiterated that the worsening coronavirus pandemic poses extreme risks for the US economy. He also expressed concerns about the exhaustion in American households’ savings after the dissolution of earlier stimulus relief measures.

Mr. Powell pledged to keep supporting the economy by maintaining benchmark interest rates near zero for at least three years. Meanwhile, he also proposed to make upward adjustments in the Fed’s asset purchasing program. The bank currently buys $120 billion worth of Treasury and mortgage-backed securities.

Dollar Dips

The statements stressed the US dollar. On Thursday, the greenback fell 0.94 percent as talks of more central bank spending threatened to hurt its purchasing power. Its dip prompted investors to seek opportunities elsewhere, with Bitcoin emerging as an ideal candidate thanks to its consistent uptrend since the previous two weeks.

The cryptocurrency jumped by up to 18 percent following PayPal’s foray into the cryptocurrency sector on October 21. Later, the US presidential election uncertainty followed by the prospects of a Joe Biden win against Donald Trump helped to extend its bull run (read here) further.

Investors flock into Bitcoin after Fed’s pro-inflation remarks. Source: BTCUSD on TradingView.com

As earlier covered, the Democratic nominee has promised his voters that he would boost government spending to aid them through the pandemic-hit economy. Therefore, investors anticipate that Mr. Biden, as the next US president, will unveil a gracious stimulus package – with a baseline of at least $2 trillion.

Fed Wants Stimulus

Mr. Powell also stressed the need for a broader fiscal relief to mitigate coronavirus’s impact on Americans, adding that it would further help avoid bankruptcies and long-term labor market damage.

“We’ll have a stronger recovery if we can just get at least some more fiscal support, when it’s appropriate and at the size Congress thinks is appropriate,” the Fed chair added.

Overall, fresh dollar liquidity into the US economy would limit its appeal as safe-haven, as had happened after the March 2020 stimulus package. That somewhat explains why Bitcoin surged immediately after the FOMC meeting hit the wire.

‘I expect Bitcoin will return to all-time highs by January 2021,” said market analyst Parabolic Thies. “The craziness of a bull run ensues thereafter.”

He meanwhile warned that the cryptocurrency would risk correcting by at least 30 percent during its current bull run.





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3 things traders are saying about Bitcoin and the state of the bull market

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Bitcoin’s (BTC) dip below $29,000 on June 22 rocked the markets a handful of analysts to call for a potential drop below $20,000. 

Many traders on crypto Twitter were focused on the formation of a death cross on the Bitcoin chart as an omen for another potential drop in the price but analysts with a more contrarian point of view look at this chart pattern as a signal that it is time to buy the dip. 

Three reasons why some traders still see a bull case for Bitcoin include the appearance of the “spring” stage of the Wyckoff accumulation model, steady buying by long-term holders and the formation of a bear trap at the golden ratio that is similar to moves seen during previous bull runs.

The Wyckoff model says spring has arrived

The Wyckoff accumulation model has been all the rage amongst cryptocurrency analysts over the past month as the price action for Bitcoin has been tracking the pattern relatively closely since the May 19 sell-off.

As seen in the tweet above, Bitcoin’s plunge below $29,000 and the subsequent recovery above $32,000 has some analysts suggesting that the “spring test” seen in phase C of the Wyckoff pattern has been fulfilled. This would indicate that the bottom is in for the current correction and now begins the choppy climb higher.

If this turns out to be true, BTC would enter phase D, also known as the “markup phase” where a new uptrend is established and “pullbacks to new support offer buying opportunities” that are often seen as opportunities to buy the dip.

Related: Bitcoin drops below $36K as century-old financial model predicts big BTC crash

In phase D a breakout to new highs is expected as the cycle completes and prepares to potentially begin again once the move higher is exhausted.

Long term holders are still bullish

Another bullish sign cited by analysts is the steady accumulation by long-term holders.

The Bitcoin long-term net holder position shows that investors actually began to reaccumulate back in late April and they began to significantly increase their activity in May as the price fell into the $30,000 to $40,000. On-chain data shows that these investors have continued to buy into the most recent dip.

This activity suggests that more experienced crypto traders are familiar with Bitcoin’s market cycles and view the current range as a good level to open long positions when fear is high and the sentiment is low. 

The biggest rewards go to those who take the risk to buy an asset amid plunging prices and sentiment, and these are the types of situations where the contrarian traders thriv.

A bear trap lurks at the golden ratio

The third scenario some analysts are focusing on suggests that the current price movements have set up a bear trap that echoes a move seen during the last cycle which involves a pullback to the 1.618 golden ratio extension level which will then be followed by a breakout to new highs.

From this perspective, the market is currently in the awareness phase of the four psychological stages of asset bubbles. After the bear trap occurs, Bitcoin will enter the mania phase where widespread media coverage attracts the attention of new market participants who then chase the price to ever-increasing heights “based on the delusion that the asset will keep going up, forever.”

Previous calls for the possibility of Bitcoin reaching a price of $200,000 by the third or fourth quarter of 2021 by veteran trader Peter Brandt, who was far from alone in predicting its value to surpass the $100,000 mark this year, would suggest that the long-expected blow-off top is yet to come.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.