Bitcoin broke out of a six-month downtrend last night to usher in suggestions that it is ready for a run towards the halving in May. Amid suggestions that escalating tensions in Iran are driving purchases, Bitcoin finally escaped the correction that began in July last year when it topped out at $13,868, as it rose in line with gold and silver. All eyes are now on where it settles, as this will give a major indication of the short-medium term future.
Non-stop Til May?
As the above chart shows, even on the most aggressive chart, Bitcoin managed to poke its head above the trend line, which prompted some in the space to suggest that we might have the start of the next cycle on our hands:
Has a new bull market began in #Bitcoin $BTC?
1. Market held support at lower boundary of multi-yr channel
2. Small H&S bottom on daily chart
3. Pending penetration of 6+ mo channel
If enough cryptocultists have been shaken out since Dec ’17, then “yes”
If not, then “no” pic.twitter.com/vpKQeOKqLI
— Peter Brandt (@PeterLBrandt) January 8, 2020
Whether we are indeed on the verge of a new cycle depends almost entirely on where the inevitable pullback ends. We will very likely come back into the channel again, and anything down to the $7,500-$7,600 level would represent a higher high and a higher low after a period of sideways movement, which is a bullish sign. Should we stay above the trendline in the pullback then the odds that a new Bitcoin cycle is underway are very high indeed.
World Events Playing a Part?
While some were looking at price action, others were busy linking Bitcoin’s rise to the situation between the USA and Iran, following further escalations:
$BTC up 23% following Soleimani’s death
— The Crypto Dog? (@TheCryptoDog) January 8, 2020
— Travis Kling (@Travis_Kling) January 7, 2020
Despite the correlation being undeniably strong, Bitcoin is still to young an asset to be considered a safe haven in comparison with gold and silver. We saw last year with the US/China trade war that Bitcoin has the ability to move higher when geo-political events are making headlines, but the idea that those who traditionally buy gold and silver in times of crisis are also buying Bitcoin is, still, laughable. Instead, traders bet on the narrative being strong enough to carry the price, and so it becomes a self-fulfilling prophecy – Bitcoin goes up in price because everyone is buying Bitcoin on the assumption that it will go up in price…and so it does!
Either way, we can expect a negative reaction as the situation (hopefully) cools. Gold, silver, and now Bitcoin have all made inverted hammer candles, suggesting that they have peaked and run out of steam, so all we can do now is watch and wait as world leaders debate the fate of our bags.