In the four months since the beginning of the year, the Bitcoin price has already shown its volatile side. While BTC was still quoted at $7,200 on January 1st, 2020, it temporarily rose to as high as $10,400 (+40%) before falling to $4,500 and from there rising to its current value of $8,800. Just now, in view of the upcoming Bitcoin Halving, the question arises whether the Bitcoin price will soon be above the psychologically important mark of $10,000 again?
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Bitcoin course and the MACD: return of the bulls?
Let’s start with a technical indicator: The Moving Average Convergence Divergence (MACD) indicator is a popular indicator in chart analysis. It is mainly used to predict medium-term trends. The indicator describes “changes in the strength, direction, momentum and length of a trend.”
Since the strong Bitcoin price increase last week, the MACD indicator has been bullish again from a 1-week perspective. For the Bitcoin price this was – at least in the past – the start of a bull run.
To be more specific: in 2017, the MACD turned positive and thus initiated the well-known rally from $2,000 towards the $20,000. In 2019, the indicator also turned green before the Bitcoin price rose by 300%. Last, but not least, the MACD accompanied the BTC this year on the journey from $8,000 towards the $10,400.
Has the decoupling begun? – BTC with decoupling
Since the sharp price correction in the financial market in mid-March, the correlation between Bitcoin and the S&P 500 has increased significantly. Thus, the development of the Bitcoin price was strongly dependent on that of the US financial market. The associated fear was that a potential further crash of the S&P 500 would also lead to a correction in the Bitcoin price.
However, especially in the last few days, a strong momentum or development of Bitcoin can be seen. This would be a strong signal and Bitcoin would thus once again fall into the trend observed before the massive correction in mid-March: BTC as an uncorrelated asset.
BRRR: Bitcoin course and the FED printing presses
One of the biggest advantages of Bitcoin over classic fiat money is its hardness. BTC cannot be created arbitrarily and therefore the Bitcoin price is not subject to as much pressure as fiat money, for example. This means that the inflation rate of BTC cannot rise arbitrarily by increasing the amount of supply.
In view of the current disastrous effects of COVID-19 on the US economy, it is to be expected that the Federal Reserve will follow the political pressure even more closely and thus pursue an even looser monetary policy.
Jerome Powell, the chairman of the Federal Reserve, spoke a few days ago about the effects of the Corona crisis on the economy: “We will see economic data for the second quarter of 2020 that is as bad as we have seen in US history. COVID-19 and the measures we are taking to protect ourselves are having a direct impact on the entire economy.”
Powell sees this as confirmation (he even gave his promise) of maintaining the current low interest rate policy. He also said that the FED will continue to provide liquidity to the market. This means nothing other than a further massive increase in the money supply and thus weakening the purchasing power of the US dollar. This will fuel one of the most important purchasing reasons for Bitcoin. The current monetary policy of the USA is thus a clear support for the Bitcoin course.
Bitcoin hashrate is rising: Miners expand capacities
Finally, let’s take a look at the hashrate. The analysis data from Glassnode serve as a basis for this. The hashrate of the Bitcoin network has risen to a new all-time high of 150 exahashes.
An increase in the hashrate is a clear indicator for the expansion of capacity by the miners. In other words, the miners are investing massively in new equipment and network security. Considering that Bitcoin mining is a long-term business model, it is reasonable to assume that the majority of miners also expect a long-term increase in the Bitcoin price.
It, therefore, can be concluded that there are currently many positive factors for BTC. The probability that the Bitcoin price will rise above the $10,000 mark in the short to medium term (and of course even more so in the long term) is high.
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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
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