Asset AllocationThe Bitcoin price has risen again following PayPal’s good news regarding its partnerships with the three largest Bitcoin payment processors, but has lost around 50% in value since the beginning of the year.
Everyone is currently looking for answers to why the Bitcoin rate fell so sharply from its 1,100 US dollar high in December 2013. If you ignore some specific information, you can wrap the reasoning in just two words:
Portfolio Structuring as in cryptosoft
To put it simply, there are simply more interesting investments since the Bitcoin price has started to fall continuously from a relative high in June and July. The following chart shows the cryptosoft Bitcoin price since its high compared to other forms of investment:
As you can see, the S&P 500 (orange), the Dow 30 (yellow) and the US dollar (red) have clearly outperformed the Bitcoin since June. The money always flows where it can multiply. In addition, sales are increasingly accompanied by sales and a so-called feedback loop is formed. Since the Bitcoin continues to fall, sales will continue to increase, especially among traders and miners.
The prevailing opinion is: “Why should I hold something if it’s worth less tomorrow? This attitude will also remain until there are the right hedges, e.g. through derivatives, or the Bitcoin price slowly returns to a long-term upward trend.
USD vs Bitcoin
The following chart shows the 5-year course of the US dollar exchange rate. As you can see, the US dollar is currently reaching a new high:
btc price 2
The US dollar has left Bitcoin clearly behind since June and July and there are various reasons for the strong US dollar. Among other things:
The end of the quantitative easing (QE) on the part of the federal reserve in October and rising interest rates.
The perception of a crypto trader
Money which increasingly flows from European countries to the crypto trader. Should the US dollar lose wind again, this would be good for Bitcoin. A look into the future. If there is a correction in the equity market, the money will flow out of the equities and look for other asset classes. So the money could then flow into weaker assets such as crypto trader Bitcoin, commodities and growth markets.
Some members of the Bitcoin community have speculated that the Alibaba IPO could be the reason for the fall in prices. But this can also be seen positively, because those who bought their shares for 68 US dollars will probably sell them again when the 32% have made a profit and are looking for new investment opportunities.
On Wall Street, there’s an old rule:
“Shares do not rise in value if demand does not outstrip supply. Demand is measured in volume and therefore volume must precede price”.
Rising volumes and prices generally produce news. If you look at the downward trend to the end, you should also look at the volume. If the volume rises with the price due to good news, a cumulation is also usually to be observed.
If you look at the seasonality of the Bitcoin, the Bitcoin price started to rise last year at the beginning of October, maybe that is a pattern we will see this year.