Inflation-Beating Bitcoin Faces Interim Resistance Near $11,000

Bitcoin

Bitcoin extended its recovery early Tuesday, as the price came within striking distance of $11,000 before being promptly sent back below $11,700. The largest cryptocurrency by market capitalization has enjoyed gradual upward momentum for the past three sessions – moves that coincided with the announcement of a Bakkt launch date.

BTC/USD Update

The bitcoin price peaked at $10,955.48 on Bitstamp, but failed to overcome $11,000. At the time of writing, the BTC/USD exchange rate was down 2.2% at $10,692. Over the past 24 hours, prices are little changed.

Bitcoin (BTC/USD) approaches $11,000 for the first time in a week. | Source: TradingView.

Bitcoin’s relative strength index (RSI) is back below 50 but remains well above last week’s low. Bitcoin’s daily RSI has fallen to the low 40s only twice since February. Anything below that level suggests assets are approaching oversold levels.

Even with the latest pullback, bitcoin’s price has recovered more than $1,000 from last Thursday’s low. The network has a total market capitalization of $191.5 billion. At those levels, bitcoin’s market-dominance rate is 69.1%, according to CoinMarketCap.

Trade volumes have picked up gradually over the past 24 hours, with verified spot exchanges processing just over $1 billion worth of BTC trades. Volatility in either direction for bitcoin is usually accompanied by a big jump in trading volume.

Bitcoin as a Safe Haven

Bitcoin and other cryptocurrencies are becoming more appealing as safe haven assets for investors looking to diversify against trade tensions and geopolitics, according to Markets Insider. Although Hacked picked up on this phenomenon a long time ago, more mainstream media outlets have started documenting bitcoin’s store-of-value characteristics.

With global economies weakening across the board, central banks are prepared to implement a new round of inflation-generating policies. The Federal Reserve, Bank of New Zealand and Reserve Bank of Australia have already slashed interest rates. Now, the European Central Bank has become a prime candidate for a new round of quantitative easing following the latest batch of dismal inflation data.

Governments have convinced people that inflation is a good thing because it signals rising demand for products and services. They’ve also managed to shift the definition of inflation to rising prices at the consumer and producer levels. Actually, inflation is defined as the growth of the money supply; rising prices are merely a symptom of that phenomenon.

If more inflation is coming, then the value of national currencies will fall (at least, the purchasing power of those currencies). Under these circumstances, bitcoin could prove extremely valuable – even if it doesn’t catch on as a medium of exchange. That’s because bitcoin has been appreciating much, much faster than the rate at which national currencies have lost their purchasing power. If bitcoin hits some of the targets the bulls are forecasting, this trend is expected to continue for the foreseeable future.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. Chart via TradingView. 

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi