Bitcoin price (BTCUSD) has been in an upward trend of late. The price has been in the green in the past consecutive three weeks for the first time since April. Also, the price has soared by more than 25% in the past three months, outperforming the 7% gains by the S&P 500 index. Yet, we believe that the price is likely to continue rallying in the near term. As of this writing, Bitcoin is trading at $11,629.
Lower real yields plus new stimulus to be positive for Bitcoin prices
In the past few months, the Federal Reserve has slashed interest rates to historic lows. At the same time, the bank has been printing vast amount of money through its open-ended quantitative easing program. Indeed, the latest data shows that the Fed’s balance sheet has soared from less than a trillion dollars in 2008 to more than $7.1 trillion. As shown below, the trend has been on a sharp increase in the past few months.
The vast amount of dollars together with historically low real yields has forced investors to move from cash to other assets like gold, stocks, and cryptocurrencies. Therefore, while the normal inflation numbers have been relatively low, inflation in financial assets has been through the roof.
And, congress is now negotiating for another stimulus package that will see households receive more than $1,200. Indeed, a typical family will receive more than $3,000. Obviously, that is a small amount to most people. However, to a substantial number of people, some of those funds will go to the financial market, which will see stocks and Bitcoin price continue to rise. Indeed, Bitcoin trading itself generated more than $840 million for Square.
Another factor that will push Bitcoin price higher is the fear of missing out. With prices continuing to rise, many people will push their funds back to Bitcoin to realize some of the profits. Consider the tweet below.
Bitcoin price technical analysis
The weekly chart shows that Bitcoin price has been on a strong upward trend. The price remains above the 50-day and 100-day moving averages. The BTCUSD pair has also formed an ascending triangle pattern that is shown in green. Therefore, I suspect that the trend will continue being upwards, with the initial target being $13207, the highest point on July 2019. A move above this level will see the pair move to the next resistance at $13917, which is the highest level in 2019.
On the flip side, a move below 10,000 will invalidate this thesis. This is an important price because of its psychological factors.