Last week, Bitcoin plunged like a stone in water, falling through the $10,000, $9,800, and $9,500 price supports in rapid succession. But on Monday — Labor day for the U.S. and Canada — the cryptocurrency mounted a strong recovery, surging by 7% on the day.
As of the time of writing this, the cryptocurrency is trading at $10,400. Analysts have mixed opinions on this move. But, a growing number of traders are starting to lean bullish on Bitcoin, especially considering the macroeconomic backdrop and this industry’s fundamentals.
BTC Correlates With Chinese Yuan
While this surge higher caught many traders with their pants down, maybe it shouldn’t have.
CL, a popular cryptocurrency trader on Twitter, pointed out that for the umpteenth time since the trade war started between the U.S. and China, Bitcoin rose as the U.S. dollar strengthened against the Chinese Yuan. He/she claims that this likely isn’t a coincidence, especially considering the repeating motif of BTC rising amid developments in the trade war.
Just look to the image below, which shows that when the Yuan started collapsing amid the implementation of fresh tariffs, Bitcoin traced it.
When it happens, once or twice, it may be luck. But I don't think this is luck anymore. pic.twitter.com/VXsgh5bECB
— CL (@CL207) September 2, 2019
Despite this clear correlation, Peter Schiff, a prominent gold bull, bashed the narrative that Bitcoin is a viable safe haven. In a tweet published in the wake of this surge, he wrote that the recent rally isn’t a sign that the cryptocurrency is a beneficiary of “safe haven buying [that is] similar to gold”.
Instead, Schiff argued that Bitcoin is being bought up by “speculators” betting that investors are searching for a store of value.
This comes shortly after he claimed that Bitcoin’s inability to maintain gains in this tumultuous macroeconomic environment is a sign that it has “failed the safe haven test”.
Of course, the high volume of Tether (USDT) trades — which are widely believed to be completed by Chinese traders — tells a different story. But Schiff has been quite staunch in his belief.
As trade tensions rise and the yuan falls, Bitcoin is trading back above 10K. But don't believe the hype that this rise reflects safe haven buying, similar to gold. Bitcoin is not being bought by investors searching for safe havens, but by speculators betting that they are!
— Peter Schiff (@PeterSchiff) September 2, 2019
But, as Blockonomi has reported previously, this trade spat between two of the largest economies in the world will inevitably push up the price of Bitcoin.
According to Hans, an Ikigai Capital Management quantitative researcher, this new phase of the trade war will only be good for Bitcoin. In a thread posted to Twitter, the cryptocurrency fund analyst argued that to counteract the negative economic effect of these tariffs, the People’s Bank of China must devalue its currency.
Hans claims that “this inflation pushes up the price of ALL assets, but especially those that are scarce, such as commodities, like Gold and Bitcoin.”
Analysts Expect Bitcoin to Continue Uptrend
While this rally may seem like it is tapering off already, some are expecting Bitcoin’s bullish momentum to persist. Speaking with Bloomberg last week, Mike Novogratz of Galaxy Digital said that institutions are finally starting to enter into the cryptocurrency game, and will thus drive up the price of Bitcoin.
Like many others in the industry, he believes that this class of investors will bring in monumental levels of capital to this space, outpacing any retail investors that came before them. In previous interviews, the former Goldman Sachs partner explained that institutions are likely to bring Bitcoin to $20,000, potentially by year’s end:
“I’m not selling the next time we hit $14,000. The second time we reach that level, [there may be] a move to $20,000. I don’t expect this to happen in the next few weeks: I don’t expect it to the middle or the end of the fourth quarter. But the next wave will come when the institutions — the state of X, Texas Teachers Union, and those guys — come in, and then you will see Bitcoin hit $20,000 and higher.”