The bitcoin $BTC USD price faltered in late September, trading down to a recent low of $7,830.76 at the daily close for the month on September 30. The current mood in crypto markets is bored to bearish given low volatility in recent weeks and the failure of prices to trade higher amidst post-Bakkt launch “sell the news” sentiment. Altcoins have showed improving strength relative to bitcoin, but overall we are still at the critical juncture where bitcoin will need to recapture levels above $10,000 within the month of October to restart positive momentum for the entire sector in Q42019-Q1 2020.
Bitcoin is still within a price range and technical structure consistent with the multiple 30-45% corrections typical during bull markets, so the prolonged stay in the $8-10K range reflects healthy price action. Today’s price break up and out of the past weeks’ descending channel might signal a bottom similar to the December 2018 bottom. But, until a direction is proven decisively with volume and momentum, it is very difficult to predict which side of the market will move first.
Stress in other markets may cause a large holder, or holders, of cryptocurrency to raise cash by selling on exchange for quick liquidity instead of through over-the-counter markets where large transactions are typically conducted. In this case, I expect selling volume to be bought rapidly as smart investors continue accumulating alternative assets that are a hedge to USD, geopolitical risk and central bank monetary policies.
Consistent with prior bull cycles pre-halving, bitcoin can from here return to yearly ATH (All Time Highs) above $13,000 within a single weekly candle and never look back. Buying pressure can come suddenly from any number of factors. For example, October 13 is the final deadline by which SEC must approve or deny the bitcoin EFT proposal submitted by Bitwise. Market expectation for approval is very low, so a positive surprise will be extremely bullish for the entire cryptocurrency market. Another rejection by the SEC is likely already priced in.
A surge in buying pressure can also appear at any time from capital seeking a safe haven and/or exit from political and local currency risk anywhere in the world, e.g., HKD capital controls and related turmoil. There has been an explosion in local spot market demand for bitcoin in Hong Kong. In the recently weekly chart of LocalBitcoins.com HKD transactions, you can see a huge volume spike in the past week that exceeded the previous ATH in December 2017.
While I expect bitcoin and cryptocurrencies to benefit from investor fear, loss of confidence and any deflationary macro shocks, the beauty of these alternative hard assets is that they will also benefit from central bank liquidity injections directed to support markets. So, whichever way markets move in response to current events like Brexit, trade wars, hot wars, U.S. Presidential impeachment, political protests, etc., in the short term there is a strong reason to accumulate and hold bitcoin and similar cryptoassets. Now presents a wonderful opportunity to build a portfolio designed to capture foundational long-term value of the new global financial system already prepared to rise from the ashes of the exhausted, outdated and broken system accelerating in failure with each passing day.
From ZeroHedge today: “Of course, on Friday the Fed itself hinted that the funding shortage persists when it announced that not only will it continue $75 billion overnight repo operations until at least November 4, effectively making the "temporary" repo operation into a permanent funding fixture, but also announced 8 term repo operations starting tomorrow and continuing through Oct 29, sized between $35BN and $45BN.”
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