Weaker Currency Means More Valuable Cryptocurrency
If there wasn’t enough to drive the price of Bitcoin higher another catalysts for rising prices is emerging; easy money policy. Central banks around the world are gearing up to issue economic stimulus in an attempt to stave off the growth-slowing effects of the U.S./China trade war. Over the weekend and in the early hours of the Monday morning session, the PBOC and Finance Ministry of Germany added their voices to the choir.
The PBOC, the People’s Bank of China, says it will reform interest rate policy mechanics in order to lower real-interest rates. The move is an effective rate cut and a long-lasting one at that. In Germany, the Minister of Finance gave the EU and German economy a thumb’s up but backed it up with supportive comments. He says Berlin stands ready to stimulate if needed and is well prepared to do so if the decision is made.
Later this week, Jerome Powell is speaking at Jackson Hole. He will deliver the events opening speech and hopes are high he will confirm future rate cuts in the remarks. At least one analyst has speculated the market will sell off sharply if Powell doesn’t indicate rate cuts. My read on the economic data suggests to me the markets expectations are overblown and misplaced although another cut is likely. Add to this expectations of easing for the BOE, the ECB, the BOJ, the RBA and others. The bottom line, there is about to be a lot more currency in the world and that means BTC’s value will inflate.
There won’t be any more or less BTC but there will be more dollars, euros, pounds, yen, and Aussie dollars; BTC’s value won’t change but the value of the world’s currencies will be less; this means it will take more currency to buy cryptocurrency than it did in the past and that means higher prices for BTC. And that’s in the near-term. We still have the halvening to look forward to next spring.
I’ll be honest, the daily charts are promising but not outright bullish. The price of BTC/USD bounced over the weekend and is moving higher. The move is bullish and accompanied by a nice signal in the stochastic that is not yet confirmed in the MACD. It looks like the pair will keep moving up in the near-term but resistance at the top of the range has been strong. If, and I say IF, resistance is broken we can look forward to a nice rally up to $14,000 or $15,000 real fast. If not you can expect the range to persist until it does.
The weekly charts are more bullish. The BTC/USD is forming a long-term flag-pattern that, when broken to the upside, will carry prices up to the $19,000 or $20,000 level. As iffy as the daily chart is, the weekly chart is pointing more and more to a retest of the $20,000 level. Based on my projections a move above $20,000 is very possible. Until then, the thing to do is keep an eye on resistance in the $11,000 to $12,000 range.