Bitcoin Price - A Fundamental Analysis !

Bitcoin Price - A Fundamental Analysis !

By CryptoUser | CryptoPublisher | 27 May 2020


Lets move away from heavy technical analysis and go Fundamental, Shall We ?

These are very volatile times due to lock-downs, stock market crash, prevailing oil glut, FED; ECB and other central banks around the world have opened floodgates with printed money and buying junk rated bonds to keep economy afloat. Not only these factors makes Investors nervous, ordinary people do not have enough ( with record number of job losses) cash on hand, and are maxing out there credit cards while running down there deposits in banks, if they have any.

Read: Bitcoin Mining During the Economic Crisis and Post Halving ?

 

41f6bc1ef382d9af8079621dfb5ac67ae2f0c6d8d11236b70894f584874d0655.png

FED Balance Sheet.

Notice the spike in 2020 due to excess money printing.

 

456bee5e378f3db8aaba57e67b1886da710f903b03baf74aa7ae0523a8b9dd11.png

US Unemployment Rate - Notice the spike in 2020.

 

So we cannot solely depend on heavy technical analysis as the basis is not present, in other terms, financial situation around the globe is not normal. At present the global financial system is in a Stagflation. This means wages (earnings) are not rising but the cost of living does. Especially due to Trade War with China and tariffs. These conditions will make investors really nervous,  and will look into safe haven assets, primarily, bonds and gold.

1f62e25ab09b9ae4cbfca50d515e233750c9bbb52376aff6d2f52f33fe3741b0.png

Investor Fear & Greed Index.
They are on the Fence.

44162f51fcbb43875898ef576575034e1c7522fe5cfa56b321592e84d487ed16.png

Yield Curve of USA.

 

According to above graph, yields have gone down, indicating heavy buying into US bond market.

 

766fd2daf3da51296a95e3476d808a9b6a4e67c14cbded1c64689e60059b9f22.png

Gold rallied during COVID-19 crisis.

 

Bitcoin, or cryptocurrency in general is too volatile to consider as a safe haven asset. This may change in future. Because as the market capitalization grows, less volatile it will become. Bitcoin is less volatile compared to 2017 these days.

 

Read: Google Deleted 49 Chrome Browser Extensions that were Hijacking Crypto Wallets !

 

Below is the Fear & Greed Index for Bitcoin.

8a19d5310addc2bcd6e812edc36c4ec852cb91ebb13c4956dcf0427976c89f7a.png

Greed & Fear Index for Crypto Currency.

 

So it is clear that money is not coming to cryptocurrency market as many pre-bitcoin-halving analysts have suggested, at least not yet. On the other hand, I do not discredit good technical analysis. But my view is we should not solely depend our decisions on it.

As of today, The bitcoin got rejected at the major resistance at $10,000 and is consolidating around $9000. the primary selling pressure is coming from miners as they have to sell more bitcoin than they mine to cover their operational expenses. Part of This is due to the fact that break even cost after the halving is at $12,000. This will remain as a major overhang till the long awaiting Bitcoin rally.

Read: Bitcoin Mining During the Economic Crisis and Post Halving ?

I won't rule out an artificial pump in Bitcoin prices using the derivatives market or a rally in future. But on a fundamental stance, in the short term, I see a further decline in prices or moving sideways.

I am not a financial adviser, and this is not financial advice. Please do not make your investments solely based on information provided in this article. Conduct your own due diligence before investing in any asset. This article is for education purposes only.

 

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Sources:
https://money.cnn.com/data/fear-and-greed/
https://alternative.me/crypto/fear-and-greed-index/
http://www.worldgovernmentbonds.com/country/united-states/
https://tradingeconomics.com/commodity/gold
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

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