Forecasting Bitcoin

The past week in Bitcoin has been one for the record books, after blasting through the $460 level of resistance the week before, Bitcoin in the past week has gone from $500 to almost a 2 year high of $593.89 on Bitfinex and is now trading in a $560 – $590 range. The next key resistance levels are $590 and $600 and in the China world it is 3900 and 4000 CNY. The predominant driver for this rise has been the devaluation of the CNY with China leading the rise in which we saw BTC/CNY premiums rise near 10%. Premiums have since come down since that point (as a side note, this was a great trade – short BTCCNY long BTCUSD), but they are still trading positive nonetheless indicating that we are still in a bullish short-term environment.

With the Bitcoin Halving looming in about 30-odd days time, many traders are looking back to the last halving in 2012 where on the halving date price was $12.50 and half a year later it was $130. There are many reasons why this analysis is incorrect and I don’t believe we will see the same return structure as we did 4 years ago. However we have some interesting dynamics that were discussed in previous newsletters: the ETH and DAO fallout and Bitcoin’s return to glory, Yellen’s hawkishness, investors desire for assets such as gold in a negative rate enviornment, CNY devaluation, and Brexit as discussed above. I believe these factors all contribute to a positive indicator for a medium-term view on Bitcoin.

Looking at the longer term and bigger picture of Bitcoin, the water becomes very muddy. I see Bitcoin’s sustainability to be either as a stable and respectable safe-haven currency to be compared with gold or in its usability with true functionality as a payment processor with wide-spread adoption. Whatever route we take depends on the path the community takes right now. I have faith however, given that Bitcoin has shown to be resilient time and time again after being officially being declared dead over 100x.