Last week Bitcoin broke above its September 19 High, effectively crossing the short-term Resistance, reversing the sentiment to bullish. Why this happened? Well talks of a new stimulus package have been renewed and along that the U.S. Dollar (DXY) has started to lose its value in expectation that new money will be inserted into the system.
What does that have to do with BTC? Simple. As you see on the chart (marked with green), in the post COVID outbreak era, every time the USD initially rises and then starts to fall while the M1 (money supply representing the stimulus on this study) starts to fall but news have it that the printing machine will stay on to support the economic damage sustained by the COVID outbreak, BTC starts a rally (one time very aggressive, the other two not so much).
What does this show? That as long as new stimulus will be provided into the market (M1 rising), depreciating the USD already in circulation (USD falling), this fresh capital is used into risky investments such as Bitcoin, causing its price to rise. What's surprising on this find, is that those readings seem to be systemic, as the appear on an average of 40 days. Can this be used to identify medium-term BTC accumulation levels? Seems like it.
What do think? Is the cheap dollar and renewed stimulus deal talks the reason for this rise on Bitcoin? Feel free to share your work and let me know in the comments section!
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P.S. This is a continuation of a cross asset study that I published 2 weeks ago (September 27) but was deleted. I am posting it again below for future reference reasons:
The answer to this question of Bitcoin evaluation is very complex. Bitcoin price is a function of supply and demand and Bitcoin market fluctuations. A comprehensive report of Bitcoin possible asset evaluation scenarios into the future is made in the "Crypto Researh Report", downloadable for free in their website. Fundamental evaluations aside, the Bitcoin market is very volatile and subject to market fluctuations which are not necessarily correlated to the the FED money supply and DXY in the long term, even though they might be correlated occasionally such as during Bitcoin sideways periods. In previous bull runs Bitcoin decoupled from both the stock market and DXY.
TradingShot
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@idz, Very good input. I wanted to include this report on my analysis but I didn't know whether or not tradingview would count it as an outside reference and filter it ou.
UnknownUnicorn100937
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@TradingShot, It was a long read and I just finished reading the report. They've made a very conservative fundamental analysis of some cryptocurrencies fair price and their projection to Bitcoin is $ 19,024 for 2020 and $ 341,000 for 2025. Not too bad, for a conservative, moderate estimate. One of the most interesting takeaways of the report though is that Tether is likely to blow up sometime the future for lack of proven audits on their cash reserves, and that they've been issuing billions of Tether (USDT) out of thin air, this year alone around 12 billion USD.
cosmicnexus
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Yah, that's how the normal markets work as well TS... the gov and bankers inject more liquidity into the system and buying goes up. It's what has driven the crazy stock market rallies despite many signs that the economy has been intubated on a respirator. Your analysis is good in that it shows us how closely BTC and cryptos in general have become tied to the normal equities markets, a fact which on the one hand means crypto is probably going to be around for a good long time to come, but on the other hand means it's being affected by emotional buying/selling silliness more than ever now. As a result, if you play it right there should be more potential profits available in trading cryptos, but there's also more potential for losses if you make poor decisions because you became one of the emotional swing traders following the crowd. We need to develop "herd immunity" here... i.e. becoming immune to following the herd into disaster!
TradingShot
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@cosmicnexus, Do you think I should do a similar one on the stock market dated as far back as possible?
behzadmpt
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It seems reasonable :
One asset increases in its supply may result in a decrease in its value like the US dollar. Only papers without new economical income.
On the other hand, bitcoin is decreasing in its supply, so the result is clear.