After the 2017 rally which recorded an all-time high price of $20,089.00 on December 17, 2017, bitcoin has slumped and just a little less than a year, it went down to $3,191.30. For a couple of months it just went swinging from 3thousands and 4thousands, but just last month it reached 5k and now, it is playing at 7.9 to 8k.
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What could be the reason(s)?
- The Weakening US Dollar currency – According to Ron Paul, a former US Congressman, and a bitcoin supporter, in his response to a call to ban crypto in the US, he stated that such a ban is highly unlikely, but also that US dollar is going to self-destruct.
Last May 9, US Congress Brad Sherman raised heavy accusations against digital currency and called out to ban the crypto. The representative claims that digital tokens are just another thug in Washington”. Here is what the congressman’s stated on his video as posted on the twitter by Coin Center:
“I look for colleagues to join with me in introducing a bill to outlaw cryptocurrency purchases by Americans, so that we nip this in the bud, in part because an awful lot of our international power comes from the fact that the dollar is the standard unit of international finance and transactions.
“It is the announced purpose of the supporters of cryptocurrency to take that power away from us, to put us in a position where the most significant sanctions we have on Iran, for example, would become irrelevant.
“Whether it is to dis-empower our foreign policy, our tax collection enforcement, or our traditional law enforcement, the purposes of cryptocurrency – the advantage it has over sovereign currency – is solely to aid in the dis-empowerment of the United States and of the rule of law.”
Ron Paul, however, is not fazed by Brad Sherman’s statements. In his interview with Yahoo Finance, he stated that the US dollar is in a “bubble” and that the 2008 financial crisis is nothing to what awaits us this time. He further said that the“trust” in the US dollar and the United States government has caused the bubble to “get bigger.” According to him:
” I’m interested in the issue of alternative currencies, I’m interested in what happens when the market crashes and I’m interested in preserving an environment where people can have alternative ideas that might help solve the problems we have. I think that’s what bitcoin offers: an alternative. I want a free marketplace.”
- US-China Trade War – What could be a better hedge for the worsening trade war between the US and China is bitcoin and people are probably seeing it the same way as the founder of Digital Currency Group, Barry Silbert.
Barry Silbert was recently interviewed in the Fortune’s Balancing the Ledger and he pointed out that the spike in the Bitcoin price and other Cryptocurrencies started after the setback on the US-China trade talks. According to him:
“It’s certainly interesting that the [Bitcoin] price started its acceleration, moving up and to the right, when the trade discussions broke down.”
He thinks that bitcoin is “serving as a bit of a non-correlated asset,” when he further said that:
“If you look at over the past five years — when Brexit happened, Bitcoin went up. When Grexit happened, Bitcoin went up.”
Gold can be another hedge but central banks are hoarding this commodity in recent years. When the economy went down in the future, the central banks will most likely sell their gold and treasuries first and according to Silbert “although it doesn’t mean necessarily that the money will move into Bitcoin, it just means that you don’t have the forced pressure of people selling the Bitcoin”.
Grayscale investments have the same sentiment when they launched an ad encouraging people to drop gold and invest instead in bitcoin.
Random Walk is an education company that teaches options trading and we are not discouraging everyone not to trade options. It is always good to take advantage of its volatility however it would be better if we can diversify our investments, interestingly, bitcoin surfaced as our new option. You may like to check our cryptocurrency portfolio to learn more about it.
Option Trading Newsletter: September 19, 2016
Friday’s action was good for the bears on the expiration ‘witching’ day. Oil is trying to gain traction but staying around $44 a barrel. Volume was higher to be expected. The markets will be looking for some direction from the Fed on Wednesday but in the meantime the bulls and bears will dance a bit more.
Option Trading Newsletter: September 16, 2016
Overnight, world markets are mixed with oil down 2.3% to $43.50 a barrel. VIX is over 16 and the bulls and bears are pulling stronger. Perhaps next week the FED will break things up and the market will go higher if no interest rate increase is announced.
