The crypto king, Bitcoin is up over 11% today, it has soared over 200% year to date- outpacing all the top 3 coins by a huge margin. Bitcoin is the trade of the week and given the massive uncertainty and risk off attitude, I think it is highly likely that Bitcoin could easily top this year’s high of $14,000. The bitcoin price had several battles with the 50-day moving average during the past few weeks, but finally the bulls have conquered this battle field.
There is no doubt in mind that the price is going to break this year’s high.
Bulls need to thank Donald Trump for this current move because this is completely driven due the geopolitical tensions. Donald Trump introduced new tariffs on China last week and we talked about the retaliation action by Beijing. China has unleased its nuclear weapon on the U.S. This retaliation has come in the form of China introducing the most fearful factor for the markets which is called the currency war.
The Chinese Yuan crossed the level of $7 for the first time and this is only because China clearly wants to devalue its currency. Donald Trump will have no choice but to actually retaliate against this action. Afterall it is an ego issue for him. This means that he is going to do everything in his power to not let Beijing to win this war.
Simply put, the escalation in the currency war means that the Fed will have to adopt ultra-dovish monetary policy, odds for another interest rate cut have jumped, and the only direction for the dollar index is to the downside. We all know what does this mean for Bitcoin: it is going to explode and continue to move higher.
Another reason that I think the Bitcoin price is likely to go beyond this year’s high is because Warren Buffett has increased his cash pile to an eye popping level. What does this mean? Well, an investor like him will only increase his cash position if he believes that the equity market is out of whack.
In our previous research note, we did say that the bulls need to run for the hills and now given that Warren Buffet has already done that, I strongly believe that the trend for the equity markets in the coming weeks is going to be a bearish one.
The benchmark index for the equity markets, S&P 500, has already retraced nearly 3.37% from its recent high of 3,027 (made on July 26) and given the current uncertainty in the markets, I believe that this index can go down as much as another 7%.
This leaves only a few options for traders: draw blood out of the equity markets by going short, fuel the gold rally which has crossed 1,460 today, show their love for the volatility index (VStoxx is up over 35% today) and seek shelter under Bitcoin’s umbrella
