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Bitcoin price analysts say now is a pivotal time for the world's largest cryptocurrency.
Equity markets are jittery and capital inflows into crypto are strong as investors try to figure out where to put their money.
The price of bitcoin and other cryptos, while closely intertwined, tend not to correlate to the wider equity or debt markets.
Returns are uncertain elsewhere and a bull-running cryptocurrency market is looking mighty attractive right now.
Investors are treating bitcoin as a safe haven hedge against fears that a deepening U.S.-China trade war will send stocks plummeting. More on that below.
Bitcoin has been on a rollercoaster ride since the bearish crisis of late 2018.
While JP Morgan advised BTC could fall as low as $1,260, anyone who bought the dip when the Bitcoin price hit a 6 February floor of $3,405 would now see their portfolio up a stunning 149%.
Compare that with stock and bond markets in the U.S. and Europe that are teetering on the brink.
Iain Wilson, an advisor to NEM Ventures, puts it like this: "The argument for bitcoin as a low-correlation asset, held as part of a diversified portfolio, gained limited traction during the 10-year equity bull run. It now appears that equity markets have seen the top and the question arises, where do you invest?
"The U.S. bond market curve is inverted, much of the G7 government markets have negative or extremely low yields, credit market spreads are tight and some people are speculating when, not it, the next round of central bank quantitative easing will begin. Should we really be surprised that BTC is a strong performing asset in 2019?"
Trade War Storm Clouds Blacken
The signs of doom are there for anyone willing look ahead. It’s not pleasant reading for investors, but anyone with life savings on the line has to be realistic.
Morgan Stanley’s cross-assets team says this week their cycle indicator has switched from "expansion" to "downturn." Their analysts advise investors be on the defensive to protect what they have.
The IMF warned of a global slowdown in April. Its widely-read 2019 World Economic Outlook says: "Trade tensions increasingly took a toll on business confidence and, so, financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand."
Beijing’s recent insistence that it will fire back against Trump's protectionist tariffs has roiled markets too.
A specific threat to restrict exports of rare earth metals vital for automotive, smartphone and consumer products has put pressure on high-flying tech stocks.
Hu Xijin is the editor-in-chief of The Global Times newspaper, an English-languge state-controlled tabloid linked to the People's Daily. He tweeted on Friday that China would take "major retaliative measures" against the U.S.
Based on what I know, China will take major retaliative measures against the US placing Huawei and other Chinese companies on Entity List. This move indicates Beijing will not wait passively and more countermeasures will follow.
— Hu Xijin 胡锡进 (@HuXijin_GT) May 31, 2019
The spat will extend far beyond simple trade imbalances, too. State media is now also warning Chinese students of the dangers of working in the U.S., potentially cutting off a major supply of cash for universities.
Then there’s the bombshell news of tariffs on Mexican imports. President Trump on Friday May 31 defied top advisors to threaten a 5% tariff on all imports starting Monday June 10. This will rise to 25% if the administration feels Mexico is not doing enough to stem the flow of illegal immigration.
Experts will tell you that bitcoin does not face such political worries. The tech and its adoption is the main concern.
Bitcoin Bull Run Over?
The bitcoin price briefly spiked over $9,000 on Thursday May 30 but met with heavy resistance, plunging into the $8,200s.
Can bitcoin continue its stunning upward trajectory?
Should retail investors skim off some profits, or hold out for better?
"We are only eight weeks into the current bull trend," reasons cryptocurrency trader and analyst known as Rekt Capital, a seasoned commentator who provided technical analysis for last month’s article on whether ETH would break upwards from its key $158 level. (Spoiler alert: As predicted, it did.)
"Even if we assume that this trend will last the same amount of time as the last bull cycle—152 weeks—that’ll mean we are only 5.2% into the current crypto bull market."
Still, If we read the one-month charts, we see that now is a crucial time.
"$8,500 is the level that will dictate the directional bias for BTC," he says. "Maintaining this level as support will keep BTC within the $8,500-$9,300 area, which is the top half of the macro range."
“If BTC breaks below the Range EQ [halfway between the red and green lines in the above chart] $7,700 to $8,500 will be Bitcoin’s playground," the trader says.
"Zooming in to the one week chart, we see a spinning top candle, typically a sign of trend exhaustion and an impending reversal.
"If this week’s candle prints as bearish, we could see an Evening Star reversal formation activate and the price begin to retrace."
If BTC wants to remain bullish, it has to maintain above the $8,500 support level.
“If the bitcoin price breaks down from $8,500, this would activate the rising wedge, confirming the bias underpinning the one-week candlestick formation. This would signal a likely decline towards the bottom of the macro range.”
Then, a key area for market reaction will be $7,700, Rekt Capital concludes.
Investors should not consider small corrections a harbinger of doom for bitcoin, says Alessandro Papadopoulos, head of strategic projects at crypto payments platform UTRUST.
"During the 2017 bull run, bitcoin went from $1,000 to $20,000. Despite this impressive surge, it did correct several times along the way. Bitcoin has shown practically no correlation to stocks and seems rather unaffected by this climate of global economic uncertainty.
In fact, the $9,000 to $8,200 correction will be the first of many, says Papadopolous, adding: "and should be perceived as a necessary step to sustainable growth in the long term. Not owning any Bitcoin is still the biggest financial risk any of us can take during our lifetime. "
