Bitcoin is something of a paradox. Its name suggests a single and unified "object" (a type of cryptocurrency), yet it's essentially an umbrella term mixing together several conflated and perhaps conflicting views. In other words, there's a lot of sentiment and speculation surrounding a "thing" whose fundamentals lay largely absent.
Surprisingly, it's this tangled web of clashing opinions and emotions that appears to be fueling the cryptocurrency's resurgence. Is it an alternative currency (who is using it)? Is it simply a speculative asset (akin to the proverbial tulip)? Does its monetary value stem from the perceived inadequacy of other financial assets to maintain value, due to a lack of intrinsic worth (a repudiation of the fiat system)? Or is it an odd stand-in for investment in DeFi or blockchain (with Ether being a more suitable choice)?
The crypto-anarchist dream ... disrupted. In essence, the Bitcoin embraced by today's Gen Z significantly differs from the version anticipated by crypto-anarchists of the late 80s and 90s (refer to the Crypto Anarchist Manifesto for more insight).
Bitcoin's price path primarily depends on market movements originating from these vastly divided, incongruous, and diverse perspectives and notions. How's that for certainty?
Bitcoin Shatters 10-Month High, Breaks Above $30K
Let's hear from a few industry insiders (pro-Bitcoin):
"BTC is also being seen as a reliable store of value ... De-dollarization is also increasingly becoming part of the narrative, which is further accelerating BTC adoption. With BTC, in short, you are your own bank," says Richard Mico (CEO and chief legal officer of Fin-Tech company Banxa. (emphasis mine.)
"Amidst heightened geopolitical instability, faltering banking systems, and mounting concerns surrounding reserve currencies, Bitcoin has emerged as the reliable refuge that many had anticipated," says Bob Ras, co-founder of blockchain company Sologenic. (emphasis mine).
So, are we witnessing a price surge propelled by institutional and individual investors, with the speculative wager based on the belief that Bitcoin has become a formidable, and to some extent legitimate, "safe-haven" asset?
Ultimately, the prospects of risk and reward rest on position sizing—namely, whether you're holding Bitcoin as part of a larger diversified portfolio versus "betting the farm" on a single hand.
With that said, let's take a look at the technicals.
CHART 1: BITCOIN TO US DOLLAR. After breaking above the 30K level, could Bitcoin continue higher? Chart source: StockCharts.com. For illustrative purposes only.
- Note the Broadening Top that resulted in an upward breakout (its stats also tend to favor the upside; see link for more insights on this).
- For the braver souls, note the early entry point in the January breakout, supported by high volume and the lagging span (which crossed above the cloud, conversion line, and base line).
- Also, note the cloud support projected 26 periods from the current price.
- Both the RSI and Chaikin Money Flow are screaming "divergence," indicating the likelihood of a near-term pullback (though bear in mind that bullish sentiment can keep prices elevated for a lengthy period of time).
- The Stochastic Oscillator also indicates a cross above "overbought" territory.
The Bottom Line
Bitcoin's speculative prospects moving forward rests on its perception as a safe-haven asset. With that in mind, this week's inflation reports (CPI and PPI) and other geopolitical developments, especially those concerning the BRICS reserve currency and de-dollarization, will determine whether Bitcoin's a balloon rising on hot air or a solid vehicle fueled by economic and geopolitical instability.
As a trader, this is the dilemma that underpins your wager. As an investor, this may be just another small egg in your basket. Good luck!
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
Happy charting!
