Right on cue, Bitcoin arose from its “slumber party” and bludgeoned its way upward once more, taking out formidable resistance at $11,200 with ease, leaping beyond $12,000 for a spell, and now consolidating its rapid gains at $11,742. If you do the math, that is a hefty 14% gain in a matter of days, thereby validating the technical signals that foretold a potential rise was imminent. Bitcoin is back to its old tricks, again.
Analysts were split down the middle before this upward march. There was no clear consensus. BTC could have fallen, based on the opinion of several observers, but it chose to accelerate to the north, despite entreaties to resist the temptation to do any “panic buying”. Whether that was the case is up for debate, but Bitcoin did peak at $12,300, only to fall back $700, as a round of profit taking kicked in.
From a technical perspective, the above daily chart, courtesy of Coindesk, reflects a demonstrative rise in price behavior from the world’s favorite digital asset. What had been a descending wedge pattern has now morphed into a descending channel. The sharp upward thrust broke through its upper boundary, as momentum had its way, but, as noted, BTC fell back a bit to take a breath. The MACD histogram had also been telegraphing a potential bull takeover, and its partner indicator, the Relative Strength Index (RSI), has yet to achieve an overbought condition. There could be more left in this run.
There are a few other significant technical achievements to note, as well. The $12,300 figure is a new monthly high. July was the first negative return month since January, but this current move augurs well for August, typically a slow month due to so many investors and analysts taking holiday during the period. If Bitcoin can close above $11,800 for today, then it will be eight straight green candles, a feat not achieved since June. You have to return to December of 2017 to find the previous time that this event occurred. Of note, too, is that BTC dominance has been on a tear, rising from 66.4 to 68.5%, its highest watermark in that statistic since April of 2017.
As records continue to abound, the question is whether this current rally is sustainable? Is this move just another case of running up too far too quickly, as July imprinted upon the historical record regarding June’s stellar performance? The word on the street is that macroeconomic factors are weighing in for Bitcoin and driving prices higher. In situations like these, when a BTC rise is also accompanied by a rise in crypto dominance, the pattern has been to continue on, not back down.
Patterns, however, do not always repeat themselves. One must look to fundamental events to discern any insights as to next moves. Over in the equity camp, stocks have not been fairing well of late. The S&P 500 index has fallen 5% over the past few days. Trade wars between the U.S. and China have also heated up, as Chinese officials backed away from supporting the Yuan, allowing it to fall 7% and drawing ire from Steve Mnuchin, the U.S. Secretary of the Treasury. He has since openly accused China of gross currency manipulation.
Gold prices also spiked today, suggesting that investors have been actively moving capital to “safe havens”. A portion of that capital move has more than likely been directed toward Bitcoin or “Digital Gold”, as it is quickly becoming known. Its increase in market share is also a signal that altcoin hodlers may be shifting to Bitcoin, as well. Combined with a weakening Yuan, the explanation becomes clearer still.
To this point, investors can readily access Bitcoin on the Internet, when the need arises, especially in Asia. According to Kyle Bass, founder of Hayman Capital Management: “If you’re in Asia and China and you’re in a closed currency system, or if you’re in Hong Kong and you can’t seem to get a big conversion of Hong Kong dollars to U.S. dollars what are you going to buy?”
As fiat currencies depreciate, investors now have a readily accessible option, one of the reasons why Bitcoin came about in the first place. Jeremy Allaire, CEO of crypto payments firm Circle, explained:
Humanity has now created a non-sovereign, highly secure mechanism to store value that can exist anywhere the Internet exists.
The primary issue with being a “safe haven”, however, is that capital flows can quickly reverse when risk tolerance appetites return. Profit taking is one thing, but a reversal of capital is quite another. For now, upward pressure still seems to be present.