Bitcoin: USD/BTC (BTC=X) volatility is returning in a positive way
Bitcoin (BTC) traders are used to the mood swings that come with extreme price volatility. They were elated when prices shot up 30 percent in January, the best start to a year since 2013. They were alarmed and unsettled when the spread of the coronavirus sent prices for the oldest and largest cryptocurrency plunging as low as $3,850 in early March from about $10,200 just a month earlier.
Now, volatility is returning in a positive way, prices are going up and enthusiasm is returning to digital-asset markets. Bitcoin has nearly doubled in price since hitting the March low, and a 7.8 percent rally on Monday brought the cryptocurrency back into the black for 2020. As of early Tuesday, prices were up 4.25 percent on a year-to-date basis.
Clawing back to that threshold represents a milestone for bitcoin, since the latest coronavirus-triggered sell-off was one of the cryptocurrency’s biggest crises since it was launched in early 2009. Holders are hoping the recent price recovery will attract the notice of mainstream investors, in turn driving more demand for bitcoin. But it also could prove a boon for the marketing efforts of hedge funds and other investment firms that specialize in digital assets, as they seek to woo new institutional clients.
Leaving aside the question of whether bitcoin is a safe-haven asset like gold or Swiss francs, most investors in any asset class would likely be thrilled, given what’s happening right now in the economy, just to get back what they’ve lost since the start of the year. That can’t be said for the Standard & Poor’s 500 Index of large U.S. stocks, which remains down 18 percent in 2020 despite its spectacular rally over the past few weeks.
The positive year-to-date performance just bolsters the pitch for bitcoin in the current environment; many investors in both digital-asset and traditional markets say inflation will likely follow the trillions of dollars of fiscal and monetary stimulus deployed just in the past month by governments and central banks around the world. And bitcoin, sometimes referred to as “digital gold,” is bought by many investors as a new-economy way of hedging against inflation.
lockforce Capital, a cryptocurrency investment firm in San Diego, said Tuesday in an emailed report its Multi-Strategy Master Fund lost 14 percent in March, while quickly noting (at the top of the document) performance was essentially flat for the year. While the firm said that “cryptocurrencies will remain volatile and widespread institutional adoption will take a very long time,” confidence remains.
“We believe that we can achieve superior risk-adjusted returns that are uncorrelated to the other investments that so many of our clients already own.”Blockforce Capital
An interesting development over the past week is just how many highly respected old-line Wall Street analysts – even those who don’t follow bitcoin closely – are now predicting a pickup in inflation.
Rich Bernstein, a former Bank of America chief U.S. equity strategist who now runs his own advisory firm, told Barron’s on April 3 he sees stagnation ahead for the economy, if not “stagflation” – where low or flat growth comes at a time of rising consumer prices and high unemployment.
“When you think about the amount of stimulus that is being put in the system worldwide, it seems to me that’s a reasonable proposition that you can have more inflation than people think,” Bernstein said.
And there’s Michael Wilson, a Morgan Stanley equity strategist, who wrote in an April 5 report that “there are literally no governors on the amount of monetary or fiscal stimulus that will be used in this fight.” He continued:
“Not only are we likely to get the largest peacetime fiscal deficit in history, but the stimulus targets the parts of the economy with a higher propensity to spend. Such a dramatic shift in U.S. fiscal and monetary policy relative to other regions should lead to a materially weaker dollar.”
President Donald Trump’s top economic adviser, Larry Kudlow, told CNBC that not only is he in favor of selling government bonds to “raise money for the war effort,” but that “you have fiscal policy working with monetary policy.” The takeaway is, as authorities respond to the pandemic, the U.S. central bank can be called on to provide whatever financing is needed for whatever spending programs the government pursues. Usually, the Federal Reserve acts independently of the government.
With such stark declarations, it’s no wonder crypto traders are banging the drums.
Rich Rosenblum, a former Goldman Sachs managing director who now leads the markets group at the digital-asset trading firm GSR, said in an email bitcoin’s swift sell-off in early March was driven by “non-crypto-dedicated professionals moving risk off the table, starting with liquid assets and regardless of conviction level.”
The group was “largely made up of traditional institutions” that needed to raise cash fast to meet margin calls and quarterly redemptions, he wrote.
In other words, they weren’t even bitcoiners. For those still in the game, or getting in now, the investment case has strengthened.
“The record stimulus being deployed by central banks is a reminder of why bitcoin was created in the fallout of the last global market crisis,” Rosenblum wrote. “People are increasingly skeptical of conventional monetary systems. Bitcoin with its predictable inflationary scheme and 100% uptime offers some certainty in an environment that is otherwise very unpredictable.”
Here’s another approach: Just say bitcoin’s returns are positive for the year and the cryptocurrency is beating the S&P 500 handily for the second straight year. If the inflation narrative doesn’t work, this just might.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 8,662.08.
The projected lower bound is: 5,929.83.
The projected closing price is: 7,295.95.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 18 white candles and 32 black candles for a net of 14 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 78.9648. This is not an overbought or oversold reading. The last signal was a buy 26 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 56.85. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 20 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 137.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 18 period(s) ago.
Rex Takasugi – TD Profile
FOREX BTC= closed up 238.540 at 7,351.910. Volume was 59% below average (consolidating) and Bollinger Bands were 38% narrower than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 6,802.53 7,448.08 8,100.62
Volatility: 68 133 83
Volume: 1,140,646 569,476 223,263
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX BTC= is currently 9.2% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume into BTC= (mildly bullish). Our trend forecasting oscillators are currently bullish on BTC= and have had this outlook for the last 6 periods.