It doesn’t take a genius to see that bitcoin ((BTC) is trending down.
The bitcoin price remains all about China and the trade war and as the BTC price has indicated for some time now, the progress of the China/U.S. trade dispute towards settlement.
The so-called phase 1 deal is a de-escalation of the China/U.S. trade war and you do not have to be too cynical to see the road to this stage in the slow but sure declining trend in the bitcoin price.
This trade deal progress is great for stocks but bad news for Chinese demand for secure assets outside of the reach and effect of the trade conflict and the risk of a devaluing yuan.
You can guarantee when the heat goes up at the negotiating table, up goes bitcoin’s price, well before we, if we ever do, hear about it what went on. Likewise all progress towards deals, interim or otherwise, will hit the price of Bitcoin.
A comprehensive China/U.S. deal is a long way off, as far off as last year’s bitcoin lows. So there is still no guessing exactly what will happen next in the trade conflict and hence the short term price of bitcoin.
We can, however, look at the bitcoin chart and imagine it as an index of the trade war and if you buy that as a model we can start to speculate how the trade war may pan out and thereby what will happen next.
Here is the chart which I have doodled all over:
The Bitcoin chart can be an index of hte trade war
In this we can see that if there is a quick path to a full deal, bitcoin is going to go to the low of 2019 pretty quickly, there might be a little pause just above $6,000, then sploosh the price capitulates to below $4,000.
Alternately with some trade war setbacks ahead, we would expect to get a bitcoin rally back above $9,000.
That’s a radically divergent pair of outcomes.
Now the key to this outcome is going to be down to Trump and his election hopes.
If Trump is going to win next year, then China will want to settle fast but Trump will want to hang tough because he will be able to drive a hard bargain if China is facing four years more of his pressure and hasn’t settled. Trump may get his deal early, because China will not want to face an even tougher deal post victory.
If Trump looks likely to lose his reelection bid, then China will hang back and Trump will hang back as well to berate China as a campaigning tactic. Obviously, a democratic winner will close a deal fast with China to snub the Trump legacy and get on with their own agenda, so a weak Trump in the campaign will halt or flare the trade war and boost bitcoin.
So Trump up, bitcoin down. Trump down, bitcoin up. This should be the next few months. Then when the election results loom the dynamic should reverse. With no final deal in place and Trump ahead in the polls, Trump up, bitcoin up.
If China plays awkward over the election cycle, and it will if there is a good chance Trump will not win and then Trump gets reelected the resulting retaliation will see an almighty bitcoin rally.
And the betting on Trump is as near as it can be 50/50 for reelection.
All things considered, my money is on a trend bounce at around $6,000.
Until the current bear market trend ends Bitcoin is going down and believers should buy dips and non-believers should stay away.
I’ll be buying at around $6,000 and if we see previous lows I’ll be buying a lot more.
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Clem Chambers is the CEO of private investors website ADVFN.com and author of 101 Ways to Pick Stock Market Winners and Trading Cryptocurrencies: A Beginner’s Guide.
In 2018 Chambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards.