Why Bitcoin Is Surging Higher And Why The Ban Is Fueling The Surge
In this article, we’ll look at the reasons central banks and governments want Bitcoin banned and how their efforts are having the opposite effect, whereby their efforts are instead legitimizing virtual currencies.
In the second article due out in the next day or so, we’ll analyze the charts and the massive momentum behind Bitcoin and show how the rally may have more legs to it. Please see below to become an “email follower” to have the next article including the charts emailed to you when it’s published.
Any further increases in bullish momentum will bode well for those investing in the Bitcoin Investment Trust (OTCQX:GBTC) or following the ongoing developments if the first Bitcoin ETF through the Winklevoss Bitcoin Trust ETF (COIN).
From Bitcoin’s demise to a “Bitcoin bubble” in two weeks:
With all the doom and gloom from a few weeks back about Bitcoin, with the Chinese government banning ICOs and shutting down bitcoin exchanges and even Jaimie Dimon was in on the act verbally trashing the cryptocurrency, one would have thought Bitcoin and cryptocurrencies were dead. And yet, here we are at $5.000. How can this be?
One of the reasons for Bitcoin’s recent rise is the break of its bearish trend line which I highlighted two weeks ago. I won’t rehash my article, The Two Bullish Signals That’ll Produce Another Move Higher, but I wanted to show how the trend line break in both price and the momentum was a strong signal to the market that showed sellers were getting thin while buyers were getting back in.
Chart and notes from September 29th:
- The first bullish break is the price break of the orange trend line (connecting the lows of the correction). This break is significant since it deflates the bearish momentum that was prevalent in the market. In other words, traders will be less inclined to short BTC while it trades on the bullish side of the orange trend line.
- The second bullish break is the break of the trend line on the RSI momentum indicator. The dark red line connects the highs in RSI’s momentum during Bitcoin’s correction. The fact that RSI is moving higher in tandem with BTC’s price action shows there’s momentum behind the current move.
- The momentum break and the price break together has helped to push Bitcoin to $5,000 in just two weeks. Now we’re hearing rhetoric again of a bubble when just last month, those same people were calling for Bitcoin’s demise. So what happened in two weeks?
What’s going on in the market?
There’s a push and pull going on in the cryptocurrency market. On the one hand, we have naysayers in banking and in governments who fear Bitcoin saying it could be the end of the established central banking system. The SEC came out years ago and issued a warning on virtual currencies. The warning encapsulates the fears surrounding Bitcoin and cryptos.
“We are concerned that the rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes.” – SEC
On the other hand, an increasing number of banks and governments are experimenting by investing in blockchain technology.
- Morgan Stanley issued a research report on the challenges and the possibilities for implementing blockchain technology into the financial system. The report concluded with this statement:
“Blockchain technology most likely won’t disrupt the financial industry as quickly or as completely as some expect.” – Morgan Stanley
There are two chief reasons why Bitcoin is being feared by governments and central banks.
- Bitcoin is a threat to their local currency.
- Bitcoin could be used for money laundering since it bypasses the anti-money laundering regulations that governments and international banks have in place.
The Bitcoin threat to central bank currencies:
- Russian authorities have issued their own warning about the dangers with Bitcoin and money laundering.
“Systems for anonymous payments and cyber currencies that have gained considerable circulation including the most well-known, Bitcoin are money substitutes and cannot be used by individuals or legal entities.” – Reuters
- However, the real reason surfaced in the following statement.
“Russian law stipulates that the ruble is the sole official currency.” – Reuters