Bitcoin (BTC) has rocketed; the Crypto Winter as I predicted is over. Now what? What is going on? What is the cause of these fireworks?
The answer is simple: President Donald Trump.
In the old days it would have been gold shooting up every time a world event looked set to tip over the apple cart. Trump is that cart tipper and while once gold would have benefited from the chaos, it is now bitcoin.
It is because bitcoin is a much better asset to long fear trades and bitcoin is the best and fastest way to prepare for flight and hide wealth.
So let’s think of two gold-obsessed regions; there are of course many, but the Middle East and China are two of them.
Twitter + Trump + Iran + trade war with China = money flow into bitcoin. This money flow is especially coming into crypto from China.
Bitcoin’s price ramps in Asia during the early hours for Europe and dumps when London opens. Money is going into BTC in China/Asia in the morning and popping out in fiat in London as soon as possible.
Why? Because a trade war in China is going to see a lot of pressure on the yuan and if the trade conflict goes on for a long time it will put a lot of pressure on the Chinese economy where the rich have always and will always be keen to get their money out of the country to safety.
If you are in a hurry, bitcoin is the best way to do that.
Bitcoin and any crypto goes up when ‘fiat’ is swapped for it at a faster rate than new coins are issued. It doesn’t take much of the global ocean of fiat money to move or be stored in BTC to shift it higher when it is an asset with a similar market cap to Disney.
So the call is, is Trump going to maintain or escalate the trade war with China and/or escalate the Iranian situation? For that matter is Trump going to de-escalate Trump? With Trump rattling the world for one-five years more, what is the future trajectory of the world’s best flight-capital asset?
If you think this idea is a little too wild, take a look at this chart. It is the long-term chart where the price and daily range of bitcoin is shown in bars. The bar’s height is a measure of BTC’s volatility, which is a close measure of uncertainty. The bigger the bar the bigger the uncertainty.
This shows there is a huge amount of uncertainty in the current price. That uncertainty, I think is coming from the outside in the form of developments in the U.S./China trade war. Yuan depreciation risk, economic and social implications are large if the trade relations between the U.S. and China are not normalized. It’s a binary situation, with very polar outcomes that are just the sort of volatile situation that leads to market volatility in assets.
So the short term call is, will this trade war intensify or suddenly be settled? Will the Iran situation get worse or cool down? Will Trump up his volume or tamp it down on the lead up to his highly likely re-election?
The probabilities for sudden calm seem less than good. This is bullish for bitcoin.
If BTC breaks up from its recent high, then bitcoin will crash through $10,000 in short order and then it will be time to reassess what to do next. I would normally expect an extended period of sideways trading before such a break out at this stage, but bitcoin is not necessarily going to take the slow road upwards as it is such a volatile asset it is hard to judge timings.
If you think the U.S./China trade war is going to be quickly settled then now is probably a good time to think about selling, but for me this is the beginning of the next bitcoin rally not the end and that suggests more trouble ahead.
Author: Clem Chambers