Bitcoin: USD/BTC (BTC=X) Isn’t a Safe-Haven

Bitcoin: USD/BTC (BTC=X) Isn’t a Safe-Haven

Bitcoin: USD/BTC (BTC=X) Isn’t a Safe-Haven Yet

In a note published last week on April 15th, the Federal Reserve Bank of Kansas City claimed that Bitcoin is decisively not a safe haven, noting that the asset has acted more like a risk asset than digital gold.

The central bank branch cited Bloomberg data, which shows that Bitcoin, during periods of “stress,” shows that Bitcoin operates with a positive correlation to the S&P 500 index to a level “significant at the 5% level.”

Shayne Heffernan Trade Idea

“Short-term, as usual, I don’t have a strong view, I think it could easily swing between $5,000 and $9,000 due to a a variety of forces like the demand for the USD and the hype around halving.”

“to be clear Bitcoin is not an asset, it is a lottery ticket, it may or may not go up or down in price but it will always have an inherent value of $0” Shayne Heffernan PhD in Economics

Why This Matters

While quite a few market participants among the crypto industry have been obsessed for another financial crisis just like 2008 to check the functionalities of the major cryptos of being uncorrelated and acting as a safe-haven asset, Bitcoin significantly outperformed both the S&P 500 and gold between January and mid-March, before crashing from a 9.89% YTD return to a -30.17% YTD return in a single day on March 12, 2020. Bitcoin finished the quarter with a loss of -10.45%, but still outperformed the S&P 500, which ended the quarter down -19.92%. Despite outperforming gold for nearly the entire quarter, Bitcoin finished significantly shy below gold’s positive 3.6% YTD return because of Bitcoin’s drop on March 12 (refer 2nd chart). 

However, FX volatility index, for now, has eased a bit against the highs. Approximately about 9%, it is still way above the levels we saw before the pandemic coronavirus crisis that hit the entire financial markets including FX avenues. Does that mean that the FX market has only half-way returned to normal? 

At second glance one can say: by no means. In Q2 2019, but particularly in Q4 and in the first few days of this year was abnormally low. In that sense the intensity of the fluctuations expected by the market is currently more normal than it was for most of the past year.

Bitcoin was born during the last financial crisis at a time of massive bank bailouts, inflation, and central bank intervention. Q1 2020 was dominated by coronavirus, massive government stimulus packages, and slashes to interest rates. In this time of great macroeconomic uncertainty, Bitcoin’s digital gold narrative has reached its apex. 

Overall, during Q1, nearly all cryptocurrencies experienced highly correlated daily price movement. With the exception of Dash, every coin hit its highest quarterly price between Feb 3, 2020 and Feb 19, 2020. Every asset dropped to its lowest point on Mar 13, 2020. However, over the first three months of 2020, digital asset returns varied drastically from -22% to 58%. 

Although the bitcoin price has stabilized and attempting to create upside traction, minor dips are quite possible. But if you consider the broader perspective, from April’16, the BTC has spiked from $414 to the all-time highs of $19k, currently, trading at $ 7k mark, which is still 1,660% rallies. When this is the case with BTC, could we fairly criticise the performance of the pioneer cryptocurrency?

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 8,312.30.

The projected lower bound is: 5,612.42.

The projected closing price is: 6,962.36.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 78.8586. This is not an overbought or oversold reading. The last signal was a sell 0 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 50.79. 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 32 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 3. This is not a topping or bottoming area. The last signal was a sell 10 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 4 period(s) ago.

Rex Takasugi – TD Profile

FOREX BTC= closed down -148.540 at 6,992.800. Volume was 43% below average (neutral) and Bollinger Bands were 60% narrower than normal.

Open       High       Low        Close         Volume
7,159.500  7,230.500  6,909.100  6,992.800     239,891
Technical Outlook
Short Term:          Neutral
Intermediate Term:   Bullish
Long Term:           Bearish
Moving Averages:    10-period      50-period     200-period
Close:              6,984.06       6,914.21      8,009.37
Volatility:         53             134           82
Volume:             331,990        579,656       239,413

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.

Summary

FOREX BTC= is currently 12.7% 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 volume flowing into and out of BTC= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on BTC= and have had this outlook for the last 18 periods.

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