A forest though the trees - Bitcoin
Tony Sycamore August 9, 2019 11:52 AM
Despite the recent uptick in volatility, if we step back to allow ourselves a chance to see the forest from the trees, there is a handful of trades which stand out. Bitcoin has been one of our favourite trades in 2019 and remains so for the macro and technical reasons outlined below. Following last weeks unexpected escalation in the U.S. – China trade war traditional safe haven assets such as gold, bonds and currencies such as the JPY, CHF have become increasingly sought after.
Despite the recent uptick in volatility, if we step back to allow ourselves a chance to see the forest from the trees, there is a handful of trades which stand out. Bitcoin has been one of our favourite trades in 2019 and remains so for the macro and technical reasons outlined below.
Following last weeks unexpected escalation in the U.S. – China trade war traditional safe haven assets such as gold, bonds and currencies such as the JPY, CHF have become increasingly sought after.
Highlighting the extremes to which many investors are turning, according to research by JP Morgan, negative-yielding debt stock reached an all-time high last week of U.S. $13.2 trillion dollars. In short, this means the buyers of negative-yielding bonds are paying the sellers to keep their money safe. Bitcoin offers an alternative.
This week there has been a lot of discussion around the Chinese currency, the Yuan after it broke above the key 7.00 level. Careful not to lose sight of the paradigm shift this symbolises, the recent move in USDCNY from 6.90 to 7.05 represents only a 2% move.
If Chinese authorities wish to manage the Yuan 10% lower, it projects a move towards the 7.40/7.50 area. Possibly it could fall further, towards the 8.1000 level where USDCNY spent over a decade, up until 2005. This would prompt large capital outflows. Bitcoin offers an alternative.
However, it’s not only Chinese citizens facing the prospect of depreciating fiat currencies. Central banks around the world are slashing interest rates to revive economic growth. Rate cuts usually result in a lower domestic currency. For an example of this, look no further than the fall in the NZDUSD this week.
Obstructing the currency pressure release valve, the U.S. administration would also prefer a weaker currency. In a series of tweets overnight President Donald Trump called for the Federal Reserve to take steps to weaken the U.S. dollar "As your President, one would think that I would be thrilled with our very strong dollar. I am not!" Bitcoin offers an alternative.
After rebounding from the $9k buy zone highlighted in our articles in July, we remain bullish and long Bitcoin. While we have taken the opportunity to take some profit on the bounce to $12k, I remain core long, looking for the current rally to extend towards 15/17k. The profit stop loss is placed at $10.7k.
Source Tradingview. The figures stated are as of the 9th of August 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
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.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.