By trading through $54,400, Bitcoin’s value surpassed $1 trillion for the second time. The first time through was on February 19, as the digital currency price sliced through one trillion in value on its way to higher levels before easing as riskier assets declined. The digital currency is up over 80% in 2021 and 570% higher over the last 12 months. There have been several factors that have conspired to help bitcoin rise to new heights. This scenario includes corporations announcing they will begin to accept bitcoin as a payment method. Additionally, ultra-low interest rates have helped buoy bitcoin over sovereign currencies.
Bitcoin’s rally is a function of several factors, including investments from larger institutional investors and some notable corporate purchases. Earlier in the year, Tesla, Square, and Microstrategy announced large purchases of bitcoin. Tesla announced that it had invested 1.5 billion dollars into bitcoin to prepare to allow investors to purchase its cars using bitcoin. In 2020, a catalyst that helped boost bitcoin was the announcement by PayPal that the company would allow customers and vendors to trade bitcoin and accept cryptocurrency. This announcement was a game-changer. This scenario was the first time a global payment provider decided to use cryptocurrencies for regular payments.
A Chinese app maker called Meitu said that it had purchased bitcoin and ether too. Some companies are buying companies that are related to cryptocurrency trading. For example, PayPal recently announced that it would buy cryptocurrency security firm Curv.
The low-interest-rate environment in the United States and around the globe has helped buoy bitcoin. Bitcoin does not have interest rates as a decentralized digital coin. Since most of the trades are against sovereign currencies, the low-interest-rate environment makes it inexpensive related to opportunity costs. For example, the three-month interest rate in the US is 7-basis points. The 3-month interest rate in the Eurozone is 55-basis points. Therefore, if you want to purchase bitcoin using Euros, you will receive 55-basis points by not paying away 55-basis points to own bitcoin instead of owning euros. If you trade bitcoin versus the US dollar, the fee to hold bitcoin instead of holding US dollars is only 7-basis points over three months.
Bitcoin is forming a cup and handle technical pattern that is a pause that refreshes higher. If the digital coin can close at a new all-time high, the pattern will reflect a cup and handle breakout. Support on bitcoin is seen near the 10-day moving average at 50,889. Medium-term momentum on bitcoin has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line. The MACD histogram also generated a crossover buy signal by slicing through the zero-index line. The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.
Short-term prices are overbought, but momentum is strong. The fast stochastic, which is a momentum oscillator that measures overbought and oversold levels, surged from oversold territory to overbought territory in a week. The current reading on the fast stochastic is 94, above the overbought trigger level of 80, which foreshadows a recession. The relative strength index (RSI), which is also a momentum oscillator, is moving higher but is still below the overbought trigger level of 70, which means that prices can still rise without the fear of an impending reversal.
Bitcoin has been on a tear, rallying 570% over the past 12-months. The news stream continues to favor cryptocurrency. More and more companies are announcing they will either take bitcoin as a payment method or invest in bitcoin. Payment processors such as PayPal and Square take bitcoin, providing a backdrop for digital coins to be mainstream. Bitcoin is also benefiting from ultra-low interest rates around the globe. There is a benefit of holding bitcoin over Euros, and only a nominal cost to hold bitcoin over the US dollar, based on short-term interest rates. Suppose rates remain low, which is expected according to recent reports from the Federal Reserve and the European Central Bank. In that case, there should be no interest rate cost to holding bitcoin over the major sovereign currencies.
Additionally, the technicals are very strong. Bitcoin is poised to break out to new all-time highs as momentum remains positive. A breakout will confirm the cup-and-handle continuation pattern, which is likely to push the digital coin even higher.
Disclaimer: This is a paid article. KryptoMoney does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. Readers should do their own research before taking any actions related to the company. KryptoMoney is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the article.
Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.
