Relevance up to 01:00 2021-10-16 UTC–4
Bitcoin continues its strong growth on the four-hour timeframe. It was already previously mentioned that its current growth seems very “hype”. That is, it seems that market participants have seized on some event or factor and are buying bitcoin based on it. We believe that such an event could be the SEC approval for exchange-traded investment funds to trade bitcoins on the Chicago Mercantile Exchange. However, it is advised to look a little further into the future and guess how Bitcoin will be traded next year. At the moment, it is not far from its historical highs, but what will happen when the Fed begins to wind down its quantitative stimulus program? What will happen when rates around the world start to rise, increasing the cost of money?
Many crypto experts continue to argue that bitcoin and other cryptocurrencies will not be able to occupy a prominent place in the global financial system. It is absolutely not profitable for central banks to have such uncontrolled currencies or their analogs. Everyone has talked about this a bunch of times, but it was this year that the bans on bitcoin began. China was the first to speak, but it is unlikely that it will remain the only country in the world that will ban bitcoin, cryptocurrency transactions, and mining. Other countries may not ban bitcoin, but may greatly tighten its regulation, as well as impose taxes, so its investment attractiveness may greatly decrease.
In addition, we should remember one of the main factors why Bitcoin rose to the level of $ 64,700 last time and this time. Given that these two events took place over the course of a year, what can they have in common? Obviously, it’s the worldwide pandemic crisis. This is the time when key rates were cut to zero and central banks were pouring hundreds of billions of dollars into the economy. That is, money was (and remains) cheap in itself in many developed countries. Loans cost almost 0%, which allows us to take it and invest in the same bitcoin. Moreover, the money is getting cheaper due to the quantitative incentive programs. Naturally, such instruments as bitcoin, are growing in price under such conditions, as well as with the inflation that has grown in recent months, which forces investors to look for ways to protect their money from depreciation.
It can also be recalled that the US stock indices noticeably increased during the pandemic. This is because investors have constantly directed their money into stocks, which could rise in price over time, and also bring dividend income, as well as into cryptocurrencies, which remain “a way to make money quickly.” In general, we believe that when the monetary policy begins to tighten everywhere next year, hard times may come for Bitcoin.
The bullish trend continues in the four-hour timeframe, and an ascending trend line has formed, which now more eloquently signals the mood of market participants and can promptly notify about the beginning of a correction or a new downward trend. As long as the price is above it, it is recommended to stay buying bitcoin with the target of $ 64,700. In turn, a consolidation below it will be the first signal to end the current bullish trend.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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