While in the United States the Federal Reserve finances the country in a way never seen before, the price of Bitcoin recovers completely without the need for this type of aid.
The crypto market has eliminated a good part of the relationship that it maintained in the last month with the stock market, it seems that the ground is clear for Bitcoin to revalue naturally.
The Fed injects money into a devastated economy
The Central Bank of the United States is completely redefining its vision, trying to face up to a situation classified as a black swan.
In early April, this entity approved an economic rescue package for USD 2.2 trillion, a stimulus never seen before. With this, the debt limits of a central bank were again extended, an action that in other circumstances used to be avoided.
Noting that in parallel, Bitcoin and the crypto market reacted to the actions of the FED.
The members of the FED do not agree very much with this road map, the question is that there is no other way out at the moment.
“None of us has the luxury of choosing our challenges, history and destiny put them before us. Our job is to face the evidence presented to us“, Words of Jerome Powell, President of the Federal Reserve, during a press conference last month.
The Fed’s portfolio reached USD 6.57 million on April 22. Expert analysts forecast that this figure reaches between 8 and 11 trillion US dollars in 2020. This means at least double the 4 trillion in 2019. This figure is also equivalent to almost half of the country’s exports.
As a consequence of this massive injection of liquidity, the largest US stock index, the S & P500, managed to recover more than 60% from its lowest low of 2020, but this does not mean that the historical upward trend has been resumed. Unlike, the data keeps getting worse with each passing hour.
United States GDP decreases to 2008 levels
The decrease in the US Gross Domestic Product towards -4.8% is historical. The view worsens if we consider that this score only summarizes the economic impact of the economic closure of the last 2 weeks of the 1st quarter.
April was drastically worse in terms of collateral damage from the terrible pandemic, therefore, we can only hope for even more negative data.
Either way, the economy will recover, but it will take longer than many expect.
Today the United States economy is supported by 70% by consumption. For consumption to exist, people must first produce through employment, and what is happening is the complete opposite.
At the pace of the economic slowdown, the country’s unemployment rate is likely to drop to a 15-20% range in the coming months.
According to data from the Institute for Economic Policy, jobless claims rose to 28 million. However, it should be noted that, in parallel, Blockchain jobs, associated with Bitcoin and other projects, have increased.
However, this figure could be substantially higher, because according to a survey by the same body, of every 10 people who submitted applications, 4 failed to register. 20% of the total failed to apply for impairments related to the large number of people waiting in line.
As an average of the results, More than 50 million Americans lost their jobs in recent weeks.
With the rise in its price, Bitcoin has become one of the assets that has yielded the most in 2020
Although Bitcoin is not listed as a mature asset, those that are have performed worse in this time of economic uncertainty. Oil is undoubtedly the clearest example.
Bitcoin price has recovered by more than 140% from its lowest low in 2020. That minimum was reached in correlation with the falls of the traditional markets last Black Thursday.
Today the crypto market is removing that newly created correlation. Thanks to the continuous breakdown of resistance in a week where the S&P generates losses for its investors. Thus manifesting a rise in the price of Bitcoin.
The Halving rally is being the main driver of this bullish comeback.
As the Federal Reserve floods the market with dollars, Bitcoin becomes increasingly scarce and secure.
For some, the injection of massive liquidity is the drop that will spill the glass. They believe that at least it will reconfigure capitalism as we know it.
Billions of dollars will lose their purchasing power in the process. Much of it will go to really strong values, and Bitcoin has a lead position on this list.
Stock to Flow, one of the most used models to forecast the rise in the price of Bitcoin
The metric proposed by the analyst PlanB, uses scarcity as the main determinant of the price of Bitcoin, when comparing it as it happens with the existence of precious metals.
Bitcoin is the first digital object capable of offering this quality, which in theory should be translated into value.
PlanB proposes to average the value of the BTC considering the existence of the asset (Stock) and its flow in the market (Flow), leading to the following expression: rSF = S / F.
In summary, this metric calculates how many years of production are necessary to achieve the current stock.
Bitcoin supply is limited, impossible to counterfeit, and with an extremely secure blockchain that prevents anyone from spending someone else’s coins without their authorization.
With the protocol of halving the supply speed, Bitcoin becomes even more scarce. Stock to flow indicates that the price will increase even faster when this event happens.
This metric has gone quite close to the real price of Bitcoin. For this 2020 forecast a new maximum before the year ends.
Bitcoin’s recent rise in price may be just the beginning
Thanks to BTC’s historical uptrend, various moving averages are used to identify areas where the risk relative to the reward is attractive.
An interesting graph that can be used to average good entry zones is the Bitcoin Rainbow Price Chart, from the Blockchain Center.
This chart is based on market sentiment to aid in decision-making for both holding entries, and exits with profits.
Investors are often carried away by feelings to make inappropriate decisions within the markets, raising capital when greed dominates them, and leaving in fear of falling prices.
Currently, according to this tool, Bitcoin is entering the zone where buying is the best option, leaving the liquidation zone, and showing that the largest free space is for bulls.
For a beginning investor, using this tool can be of great help, if what you think is in the long term, where decisions can be made quite calmly, without the need for emotions to influence.
Bitcoin has never been through a similar situation before, and despite being affected at first, with each passing day, he becomes stronger in a system where debt is becoming an extremely serious problem.
With the Halving approaching, a wave of investment is coming to the crypto market, trying to get on the train for fear of losing it.
The understanding of the population about the qualities of Bitcoin as a scarce and safe asset will be the main drivers of its price.
The rise in the price of Bitcoin will not be without internal falls. These respites are healthy, and generate better entry points for the greats to add positions again, each time generating a higher capitalization buffer.
The return to normality will be even better for assets that will show to be strong during the crisis. The return of consumption to normal levels will provoke an inflationary environment, product of an increase never before seen in the quantity of dollars circulating in the economy.
We hope that this article has been to your liking, and remember that all our publications are informative. In no case should they be accepted as investment advice.