Bitcoin; when good news has negative consequences

In yesterday’s article, we spoke about the unusual times we live in after the U.S. stock market rallied following Fed Chairman Powell’s testimony to U.S. the Congress and the Fed minutes that emphasised increased uncertainty had depressed the economic outlook. In this article we talk about an opposite effect as the good news that Bitcoin received in recent weeks, has had negative consequences.

In yesterday’s article, we spoke about the unusual times we live in after the U.S. stock market rallied following Fed Chairman Powell’s testimony to U.S. the Congress and the Fed minutes that emphasised increased uncertainty had depressed the economic outlook. In this article we talk about an opposite effect as the good news that Bitcoin received in recent weeks, has had negative consequences.

Facebook announced in Mid-June that it would launch its own digital coin called Libra in partnership with a host of well-established companies including Mastercard, Visa, Paypal and eBay. Helped along by ongoing geopolitical uncertainty the Libra announcement sparked a sharp rally in Bitcoin as the market concluded the Libra announcement meant Bitcoin was one step closer to mainstream acceptance.

Facebook in a document that outlined its plans for Libra said the coin would allow its 2.4 billion users access to “better, cheaper, and open financial services”. To provide stability and to become a reliable store of value, Libra would be anchored to a mix of global assets and built on its own blockchain technology.

Perhaps not surprisingly given the Facebook/Cambridge Analytica scandal remains fresh in authorities’ minds, the Libra announcement sparked immediate concerns from U.S. lawmakers. In the last 24hours, both U.S. Federal Reserve Chairman Powell and U.S. President Donald Trump have spoken out against the coin which implies the Libra project is now effectively on hold.

Bitcoin; when good news has negative consequences

Following Powell’s comments and Trumps tweet above, Bitcoin is currently trading near to 11k after trading above 13k just 24 hours earlier.

As outlined in last week’s Bitcoin article, https://www.cityindex.com.au/market-analysis/btc-from-optimism-to-despair/ Bitcoin appears to be tracing out a Wave IV retracement after putting in place a medium term high in late June at the 13.8k high. The drop from this week’s 13.2k high counts as Wave C of Wave IV, which suggests a move to the wave equality pullback target at ~9k is likely.

Assuming Bitcoin reaches near to the 9k pullback target, I will be watching closely for a bullish daily reversal candle as the set up to reload Bitcoin longs, in expectation of rally towards 16k.

Bitcoin; when good news has negative consequences

Source Tradingview. The figures stated are as of the 12th of July 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.

Any advice provided is general advice only. It is important to note that:

  • The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
  • The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
  • If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.

Related Articles

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.