|
Price pressure has been largely due to forced selling (liquidation of MtGOX BTC by the trustee).
This pressure has been exacerbated by the (unjustified) strength in the US dollar resulting from the threats of trade wars that are manifesting. (Short analysis is that rising tariffs raises prices on goods throughout the economy. Rising prices = inflation by definition. Inflation is typically combated with higher interest rates. Higher interest rates = stronger currency).
The flaw in the market's interpretation is that the Federal reserve cannot raise interest rates significantly to combat this artificial inflation because there is too much systemic debt. An increase of 1% in the Fed Funds rate will translate to ~$200 billion in annual cost of debt service just by the US government. Households will lose ~$1 trillion per year. Therefore, the dollar strength is based on a false assumption that the Fed will raise interest rates by up to 4 or 5% to combat the inflation caused by a World Trade War. I don't believe they will make that error.
If the Fed does not raise interest rates, inflation will skyrocket. In that case, BitCoin is going to act like the new Gold. In a high inflation environment, people will rush to inflation hedge assets. Gold typically skyrockets in that environment. Bitcoin is easier to buy and transact than physical gold.
Therefore, I predict that while in the short-term, BTC is floundering at around the $6,000 USD level, in the long term, it will be a go-to asset for people hedging hundreds of billions of dollars against inflation. It may resume the parabolic moves we saw last year and hit new all time highs.
Much depends on whether China, the EU and NAFTA result in real trade wars or if parties back down and cave to Donald.
|