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Weekly Market Forecast ------The Return of Bitcoin


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This Week Highlight - The Return of Bitcoin
When Bitcoin reached the first historical high at almost USD20,000 during December 2017, the world turned crazy and many non-believers started to ogle at the market and wondered if that “virtual thing” was real! After the double top was formed in January 2018, many investors began to time their entry and planned to buy on the downward retracement. Ironically, the down trend lasted for about 12 months and reached below USD4,300 in January 2019.

Since then, we did a backtracking on the bitcoin trend and tried to find correlational instrument to this “virtual currency”. Theoretically, we found out that the USD index (USDX) plunged from 103.00 to 88.00 level during the same time that bitcoin surged to its first high in December /January 2018. Rewinding back to further timeline, the identical falling trend in Dollar was in the 1H 2009 and 2H 2010 but bitcoin was still in the beginning stage of the circulation with little market capitalization. Thus, it might be meaningless to make a correlation between them during that period!

Looking at the current situation, bitcoin has initiated a new bullish trend and surpassed USD16,000 level recently that was a 34-month high. Simultaneously, the Dollar Index is trading at 93.00 region that is quite similar to the same scenario to early 2019, though we agree there might more variables in this equation. However, what we gather is the potential of further devaluation in Dollar after the U.S. Presidential office settles down in January, which could quickly follow by a new round of stimulus. In such a situation, the rise of bitcoin in near future might even climb higher than what we saw in early 2018.

In the past decades, when Dollar fell, the inverse hedge naturally sept global investors’ fund into Crude and precious metal. In current years, we have all witnessed the gradual demand fall in Crude on global basis due to the rise of green energy and electric vehicles. Hence, what will be the alternative instrument used to counterbalance falling Dollar beside Gold?

Though we all agree that the counter currencies that are used to hedge against Dollar include euro, pound, Swiss kroners, Canadian dollar, Aussie Dollar, Japanese yen and Chinese Yuan, nevertheless the U.S. Government will not stake on one, few or all these currencies for safety net. Since the 1970s, the U.S. Federal Reserve has been grabbing the control and reserve in Dollar, Gold and Crude. No matter what the global economy flairs, U.S. Government will be benefitted from one strong rise among these three instruments. Thus, the new rise of bitcoin into world recognition may simply mean that it has to be largely held in custodian and control heavily by the U.S. Government. Will that be possible?

This is just a two cents worth of guesswork for you to ponder. In any case, the unfold trend of bitcoin in coming months will self-reveal more stories than what we can randomly guess here. 

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