After a stark fall in Bitcoin’s price, exemplifying volatility that was only surpassed during the time period after the astronomical rise to $20,000 of January in 2018, Bitcoin has found itself in a consolidation pattern. With a market cap that appears dismissive once compared to other indexes such as gold and stocks, many would expect to see rapid price fluctuations as investors pull out of a variety of assets in a scramble to obtain liquid cash.
Known for its volatility and enormous potential return for risk and return, the cryptocurrency is currently experiencing a phenomenon. While Oil prices are at some of its lowest levels we’ve seen in the past two decades, the stock market has displayed downward volatility that has already surpassed what was observed in the past two financial crises.
A controversial matter to most is whether Bitcoin is acting as a safe-haven asset during these periods of uncertainty and economic turmoil. Bitcoin has better retained its value when compared to most other assets aside from cash. It must be taken into consideration that during previous recessions and economic insurgents, we do experience a sell-off of safe-haven assets such as gold and silver in the beginning and Bitcoin is not exempt from the emotional trading that we’ve seen in other markets.
Looking forward, is now that governments are taking steps to tame the wild swings we’ve experienced in traditional markets, the real question is will they continue to trend downwards or if stimulus packages and quantitative easing is enough to ease the burden. When comparing Bitcoin to cash, we also have to take into account the massive money injection that has transpired, far exceeding any other amount we’ve seen.
Is printing money valuable action to help the economic system?
With the American government conducting excessive amounts of printing, a massive supply of US dollars will be injected into the system, increasing liquidity and hopefully promote stimulation of the economy, but many debates it will lead to an inflationary event, as you cannot simply “print value” but must steal that value away from existing dollars.
What is the next major move that governments can do?
While a hyperinflationary event that could destabilize some major players in the current FIAT currency system, many doubt the FED’s ability to properly intercede in the current free-market system. To leave it up to the discretion of an organization that has recently announced they have “unlimited liquidity” and will allocate as they see fit is a naïve and questionable executive decision. With no moral or financial incentive to act out of anyone’s interest except their own, the Fed now can directly purchase ETF’s and will soon have a direct hand to play in which businesses survive and which of them fail.
What could be an outcome?
This play has not only introduced a lot of doubt into the free market economy that we currently have but has initialized interest in alternative investment options such as Bitcoin. That being said, it is unlikely that this will be a short-lived slip up for the global economy, but rather a drawn-out recession in which we have a difficult time climbing out of.
Should this be an event in which we witness a transfer of wealth, hard forms of money has always been the most reliable and coveted form of currency throughout history. Bitcoin’s max supply cannot be inflated like FIAT currency which can be printed out of thin air. Solidifying its present use case, Bitcoin with a small market cap will grow astronomically as FIAT currency systems in history have always failed with people returning to a more reliable measure of wealth. Bitcoin poses enormous potential in the ensuing months and years as more people understand the utility of Bitcoin, why it was created and how it will revolutionize finance but not only, another example would be the crypto gambling industry with crypto casinos.
What is the next move for Bitcoin?
Traditional cryptocurrency exchanges are seeing an enormous influx of new users in recent months with companies such as Binance reporting 113.8 million visitors in just the last six months. With many new users flocking to potential safe-haven assets such as Bitcoin, we also have seen a large influx of whales accumulating Bitcoin on these exchanges.
Currently hovering around $6340 per Bitcoin, for the last 2 weeks we’ve seen a steady rise and consolidation with the Bitcoin price. However, it should be noted that in the longer time frame we are still a downtrend and will likely remain in one until we get a weekly close above the 20 EMA at around $7800.
April 5th is approximately the end of the consolidation pattern that we have witnessed take form, and failure to close above before then will likely result in a drop to at least $5.4k, and potentially $4.3k depending on bearish sentiment and volume.
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