Is Bitcoin About to Breakout? Charts Suggest So
Formation in charts suggest that Bitcoin is about to surge.
Several factors have lead to a surge in the price of Bitcoin this year. One of the main factors has been the instability in China and Bitcoin emerging as somewhat of a safe haven. The Brexit referendum too led to price hikes in Bitcoin.
There are still underlying factors present that could give the cryptocurrency a further push upwards. According to an article by Forbes Bitcoin transactions could triple.
Forbes cited Juniper Research, a UK based company that specialises in identifying and appraising high growth market sectors as saying, “the total value of Bitcoin transactions is expected to exceed $92 billion (bn) this year – up around 240% from less than $27bn in 2015.”
Trump, Brexit and other global risks
Bitcoin has acted as a pillar of strength and stability in times of uncertainty lately. We have already seen Bitcoin hitting a high of $780 before the Brexit referendum.
The BBC has reported that according to the Economist Intelligence Unit, Donald Trump winning the US Presidency has the potential to ‘disrupt the global economy and heighten political and security risks in the US’.
The BBC says, “He is rated as riskier than Britain leaving the European Union or an armed clash in the South China Sea.” The Economic Intelligence Unit uses a risk scale of 1-25 and Trump getting elected the US president is cited as having a rating of 12 which is the same as the risk of jihadi terrorism destabilising the global economy according to the BBC report.
Other risks that were mentioned were Russia’s military adventures and Chinese economy taking a ‘hard landing’.
A Deflationary Currency pitted against inflationary fiat
Bitcoin is considered to be a deflationary currency and undergoes ‘halving’ on a quadrennial basis. This halving reduces the amount of bitcoins being mined by half, thus reducing the supply of money in the system. The dynamic between Bitcoin and fiat currency thus assumes a significance.
We talked with Eric Grill, CEO of Coinoutlet who says:
“There is a limited supply of bitcoin, and recently that supply has been reduced, while the demand continues to rise. Bitcoin is typically traded against currencies that continue to increase in supply (Printing more money) which will make the value of bitcoin relative to these currencies increase in value over time.”
The Charts suggest a Breakout
MarketWatch reported recently that 2016 has been a strong year for Bitcoin bulls and the cryptocurrency has climbed to levels unseen in 2 years. They have observed a technical pattern emerging in charts as analysed by equity analysts that may suggest the prices may be heading even more northwards.
This pattern known as a flag or a pennant can be seen in the chart given below.
- Source: Marketwatch
Marketwatch cited Jonathan Krinsky, Chief Market technician at MKM partners as saying that this so called pennant formation is about to resume its long-term trend after a period of consolidation.
Will the prices of Bitcoin then resurge to the high levels of US$ 764 per bitcoin? Keeping in view global uncertainties, halving and other technical factors, we may indeed be on the verge of a Bitcoin breakout.