Bitcoin soared on growing Libra optimism, institutional short covering, and safe-haven flow amid increasing concern about central bank credibility/independence

By June 27, 2019 Bitcoin Business
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Market analysis

Bitcoin (BTCUSD-Bitfinex) closed around 12876.00 in the U.S. session Wednesday, jumped almost +9.57% and it made a multi-month high of 13764.00 on growing Libra optimism, institutional short covering, and safe-haven flow amid increasing concern about central bank credibility/independence. Overall, BTCUSD soared almost +48.63% in June (MTD) and +145% in 2019 (YTD). BTCUSD is also well-off the Dec’18 low of 3219.24 and surged almost +328% till now to a high of 13764.00.

Bitcoin is now behaving like “digital gold” and a key beneficiary of safe-haven flows amid increasing geo-political tensions between the U.S. and Iran, Trump’s global trade war agenda, U.S.-China trade/cold war jitters, possible tariff inflation, increasingly dovish central banks, which are talking more about QE/easing from QT/tightening just about 1-year ago and growing concern about central bank (Fed) credibility/independence amid intensifying political pressure (Trump) for 24/7 easy money and weakness in the US dollar/Fed uncertainty.

The market is also concerned about central bank’ (Fed/ECB/BOJ) increasing QE/NRIP/ZRIP narratives to fight Trump trade war slowdown and in that scenario, central banks could be soon out of ammunition to fight any real recession in the coming days. The recent inversion of Libor along with Eurodollar also helped Bitcoin. Bitcoin was also a key beneficiary of Chinese capital outflow amid intensifying Trump trade war, Yuan devaluation and deleveraging.

BTCUSD was also boosted by huge institutional short covering, which was on the wrong side of the trade, unlike last year. There was is a report of BTC derivative discontinuation after June’19 by CBOE, although CME will continue and is experiencing record high volumes. The report of CBOE discontinuation of BTC future was published first in March and BTCUSD started to recover from a record low of around 3200 from February’19 itself, may be due to huge institutional short covering/position adjustments (as per latest CFTC data and open interest distribution).

As a reminder, the CBOE was the 1st U.S. exchange to introduce BTC future back in late 2017 and soon after that BTCUSD made the lifetime high of around 19900 on optimism about increasing regulatory approval and then plummeted to a low of around 3200, a massive fall of around 84% in 12-months on institutional short selling (through derivatives), fading hopes of regulatory approval coupled with various scams and cheating, enough to destabilize the crypto market confidence.

Although in true sense, Facebook’s planned Libra is not a crypto currency like Bitcoin, it’s a stable digital coin and a medium of money/FX exchange across the globe, much like PayPal, Libra has opened up the opportunity to monetize 2.9 billion users while also familiarizing those users with digital wallets and public-private key cryptography. But Libra could also face various regulatory hurdle and its official launch planned mid-2020 is still uncertain and is boosting the BTC appeal.

Technical View: BTCUSD

Technically, whatever may be the narrative, BTCUSD has to sustain above 14100 for a further rally to 14900/16200-16650/17600* and 18150/18700-19350/19800* and 20600*/21500-22350*/24600 in the near term (under bullish case scenario).

On the flip side, sustaining below 14000, BTCUSD may fall to 13300/12900-12500/11400* and 10400/9300-8200/7400 and may further plunge to 7200/6700-6200/5200 in the near term (under bear case scenario).

Bitcoin Chart
Bitcoin Chart

Bitcoin (BTCUSD-Bitfinex) closed around 12876.00 in the U.S. session Wednesday, jumped almost +9.57% and it made a multi-month high of 13764.00 on growing Libra optimism, institutional short covering, […]

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