|Making sense of it all!
“Sell in May and go away” is a well known financial-world adage based on the underperformance of some stocks in the “summery” six-month period beginning in May and ending in October.
However relevant this phrase is or isn’t in todays markets- it certainly cannot be used to describe the movements in the crypto markets over the last two weeks. For many, the crypto-winter was particularly bleak with some predicting the ultimate demise of the market. Despite this, the majority of those who are already in the blockchain and crypto space, were always confident that the market would eventually move back higher with very little notice paid to those predicting a complete implosion of the market and “tulip-mania”.
There are several theories as to why we have seen such a significant rally in the price of Bitcoin and surrounding coins in the last two weeks and so it seems natural to bring these various thoughts together in an easily digestible (i hope..) article.
Adoption and Accessability
In the last few weeks we have seen various examples of wider adoption of the crypto-space coming online. Ourselves and many others have talked at length about the importance of adoption to the future of the space and these examples are the exact proof of that.
Facebook Coin- Facebook have relaxed their stance on crypto based advertising and not-surprisingly this coincided with the news that they would be releasing a Facebook coin in the not too distant future. Considering the reach that Facebook has globally, this is big news.
Fidelity Investments- The financial powerhouse announced some time ago their interest in the space, and in the last few weeks we now understand they are about to roll out their offering to certain clients to be able to trade top cryptos.
Exchange Traded Funds- There is an air of inevitability about the eventual sign-off of a crypto ETF and whilst this has been rumbling on for some time now, in the last couple of weeks, yet another application for an ETF has been filed by the United States Commodity Fund.
Starbucks/Whole-foods Accepting Crypto- This doesn’t need a lot of explanation! When Starbucks and Amazon owned Wholefoods sign off on accepting crypto as payment then you can almost hear the chairs scraping back as people sit up and take notice!
Exchange hacks are nothing new for crypto-currency and ultimately, as with all other sectors, security and the integrity of it will always come under scrutiny. In recent weeks however there have been two large scale events in the form of the Tether/ Bitfinex scandal ($850m) and the Binance exchange hack (7,000 BTC). Interestingly however, whereas in the past these events would have caused a large press lower in the price of cryptocurrencies and particularly Bitcoin, we have seen stability and less of a knee-jerk reaction which in itself has given the market some confidence.
From the lows seen across the board Bitcoin begun to trade back higher and $6,000 was cited by many as being a key level of resistance to the upside from which we needed to break and then hold. When this did indeed happen, the move perpetuated and broke free triggering a surge higher in prices and a move into a new range. In addition, we then saw a crossing of the 50 day moving average price above the 200 day moving average which is known as a “Golden Cross” in technical analysis terms and constitutes a very bullish signal. If you factor in the “herd” mentaility that often follows technical analysis then it is not difficult to understand why the price would continue to rise.
There is some evidence to suggest that whilst volumes on paper have dramatically ramped up over the last few weeks, these numbers are articificially inflated due to market manipulation by certain key players and huge amounts of wash trading across exchanges, something that whilst outlawed in equities, is still fair game within crypto.
Preparation for the Future
Bitcoin Halving 2020- Next year another Bitcoin halving will take place which will take the block reward from 12.5 to 6.25 coins and as with previous halving events, there has been a surge higher in the price of Bitcoin before and after these events for reasons such as accumulation ahead of the reward halving and expected increase in price due to relative future scarcity.
Trade Wars- One of the more outlandish theories that is contributing to the price rise recently is the US/China trade war that has been developing which according to some could rumble on and have long-term ramifications if an agreement cannot be made (which seems unlikely!) Some commentators have hypothesised that Chinese investors have moved out of USD and are purchasing BTC and we are even seeing mainstream news channels commentating that US holders of Dollars are diversifying into BTC as something “more stable” in these times of uncertainty.
I think it is fair to say that there are many varied apparent reasons and justifications for the spike in price that we have seen in the last few weeks and some carry more weight than others!
The intention here as with much we do here at GlobalBlock is to collate reasoning, opinion and news stories together in order to make it easily accessible, particularly for those that are relatively new to the space and interested in finding out more. One thing is for certain, the crypto-thaw now seems underway and come what may, the summer should give us plenty more to talk about.
Thanks for reading!