The Bitcoin price has pumped significantly following Chinese President Xi Jingping’s call for the country to become a global blockchain leader. However, there is more behind BTC’s pump than just that.
On October 25, the cryptocurrency industry received very positive news when the president of China, Xi Jingping, called for the country to become the global leader of blockchain innovation. Specifically, he stated that the country has to spearhead its efforts in accelerating the standardization of blockchain research.
The Chinese president stated that the technology will help by solving several issues that are hampering the economy. Additionally, he urged the blockchain community to leverage the technology in improving the quality of education and employment, promoting public welfare, and increasing the efficiency of pension schemes.
Shortly after the news became mainstream, the Bitcoin (BTC) price jumped by 12 percent in one hour, causing many to believe that the news caused the rapid increase. However, there is more at play than that news alone.
‘Looking at the Wrong BTC Chart’
Crypto trader @filbfilb stated that the reason for the pump is the support given by the 200-day moving average in the CME chart.
PS we were all looking at the wrong $btc chart.
Bend the knee to the CME.
Im a poet didnt know it etc. pic.twitter.com/iGgdgdwoqr
— f i l ₿ f i l ₿ (@filbfilb) October 25, 2019
An interesting development in the CME has been the presence of gaps, which often act as reversal points. One such gap was found near $7800.
However, filbfilb noted the presence of the 200-day moving average (MA). As soon as the price reached it, it began the massive pump. This MA might have been overlooked by many traders.
One reason for this is the presence of gaps. Since the 200-day MA is created by a moving average of the price from the most recent 200 periods, the presence of gaps slightly skewed this average. The 200-day MA on the CME chart ($7400) and on the Bitfinex chart ($9000) is given below.
Therefore, the 200-day MA could have been a reason for today’s pump.
Following the S&P 500
Some people, such as Fundstrat’s Thomas Lee, suggested that the rally has to do with the strong performance of the S&P 500 index.
+12% rally in #Bitcoin coinciding with strong equity day as S&P 500 nearing all-time highs…
– a reminder of the 'unpopular' opinion that the bitcoin performs best when S&P 500 rallies.
– best years Bitcoin when S&P 500 return >15%.$BTC mostly retail, thus, mostly 'risk-on'
— Thomas Lee (@fundstrat) October 25, 2019
As stated by Lee, the S&P 500 is nearing an all-time high — right as Bitcoin initiated this rally.
Since 2016, the Bitcoin price has indeed had a positive correlation with the performance of the S&P 500. They both reached a high near December 2017, before decreasing. The low of $3140 in December 2018 perfectly coincided with that of the S&P 500 — and so did the recent $13,764 July 2019 high.
This, however, does not explain the sheer swiftness of today’s increase — since the S&P has only been gradually increasing.
The final reason might be the technical characteristics a correction takes — namely, the specific areas of reversal after an upward movement. In this scenario, the correction ended today, and the pump was a sign that a new uptrend has begun.
The price has been correcting inside a descending wedge for the past 121 days. Inside it, it has finished a 3-3-5 correction.
The end of the fifth wave was at a convergence between the support line and a support area. As soon as the Bitcoin price finished, it signalled the beginning of a new upward trend with today’s pump.
While hindsight is 20/20, we posted a relatively accurate prediction for this correction in July, in which we stated that the price should make a final low between $7000-$8000.
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.
Images are courtesy of Shutterstock, TradingView.
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