On October 8th, bitcoin finally made a decisive move towards $11,500, catching many traders offside in what would end up as a solid 10% surge in under two days. Was this just a brief rally or is it the beginning of something more grandiose?
Meanwhile, the US Department of Justice (DoJ) believes that it has extraterritorial jurisdiction over all crypto-businesses in existence with its latest umbrella report, raising concerns about online payments.
Finally, bitcoin’s technical data suggest major upside potential is brewing, but will US elections weigh in on these prospects?
Let’s dig in.
The DoJ extends jurisdictional powers to everyone born on earth
The US government released a report asserting it has extraterritorial jurisdiction over all crypto-related businesses, suggesting that everyone born on earth is subject to US jurisdiction.
Briefly, the DoJ’s Crypto Enforcement Framework takes a broad-brush approach at global crypto regulation. Zcash, Monero, and Dash are crypto’s mentioned in the report for criminal behaviour. The report indirectly raises concerns on whether offline cash-exchange freedoms will be extended online.
The Cryptocurrency Enforcement Framework issued by the US Department of Justice stipulates a number of cases where it will exert its authority over foreign actors: “where virtual asset transactions touch financial, data storage, or other computer systems within the United States,” if they use cryptocurrency to import illegal products into the US or if they “provide illicit services to defraud or steal from U.S. residents.”
Since virtually all data on earth touches or passes through US servers at some point or another, the DoJ is assuming jurisdictional control over everyone born on earth.
Bearing in mind that the vast majority of cryptocurrency users are law-abiding citizens, the framework appears to be invariably punishing all crypto users instead of tackling crime ahead of the introduction of CBDC’s across many jurisdictions.
Additionally, the approach raises the question of whether the rights enjoyed today via cash payments should be extended online. Indeed, should the relative privacy enjoyed by cash transactions be available in online transactions, or will this be considered a thing of the past in this brave new world?
Bitcoin makes a move; what’s next?
Bitcoin broke out just one day after the expected date, appreciating nearly 10% in just under 2 days.
While the development clearly underlines relative strength over selling pressure, this price-action came in tandem with an S&P500 rally, which is, in turn, considerably influenced by politics and stimulus talks.
Per the above chart, we might as well be trading the S&P500. Clearly, bitcoin has shown no signs of decoupling, but knowing bitcoin this can change dramatically and very quickly.
That being said, it’s only reasonable to take a cautiously optimistic outlook on all-things bitcoin until US elections take the back seat.
While the last thing anyone wants to hear is that “it’s neither here nor there”, that’s more or less the case due to US election uncertainty (and relevant political theater) and no evident bitcoin-SPX de-correlation.
Legacy markets lead the way for now.
Exchange outflows show no signs of stopping
Meanwhile, exchange bitcoin capital outflows have continued unabated and in a similar fashion to prior bull runs.
The effects of such a trend take time to materialize given that outflows are slow and gradual, right up until an inflection point is hit whereby demand overwhelms supply (or there isn’t enough supply to service buying pressure, which is the same thing). In other words, if the trend continues, then there simply won’t be enough bitcoin to go around. At the time of writing, there’s little reason to expect this trend to stop.
From a purely technical standpoint, bitcoin has broken out of its symmetrical triangle market structure and has retraced to the $11,500 area.
Currently, the number one crypto is consolidating just under the range pivot taken from the last trading range before the September dump.
Considered in this context, bitcoin is currently trading in the lower half of the trading range, and should bullish momentum continue, then a move to $12,000 to confirm this range could be in the works before more prolonged consolidation. While it’s possible for bitcoin to simply blast-through $12,000, that would represent a %15 increase in about a week; and given the macro-US-election background, this seems less plausible.
On the flip side, bitcoin could retrace to the .618 fib level at 11.187 (or lower) to fill the newly formed CME gap — which has yet to be filled. However, while it’s worth paying attention the CME-gap, this narrative appears to be more of a self-fulfilling prophecy than anything else, with the $9,600 gap still being present.
Bear in mind that exchange price-differences also play their part in trading. Current charts are based off the Phemex exchange — which is a popular bitcoin and derivatives exchange platform. Now that BitMEX is no longer the king, it’s likely for other long-standing exchanges such as Bitfinex to take a more pronounced role.
In any case, bitcoin is trading within a continuation structure, which suggests further upside potential (discounting outside influences), possibly to the .786 level, which also coincides with a developing upwards-trending channel.
Levels to watch:
- Breakout above $11,460 informs a bullish move to $11,600.
- Breakout above $11,600 on high volume suggests a macro move towards $12,000 and beyond.
- Breakdown below $11,275 informs a corrective move towards $11,100-$11,000.
- Breakdown below $10,900 suggests a possible reversal.
If you haven’t had enough of me, check out my recent contribution to CityAM for insight into the macro picture bitcoin finds itself in.
Suffice it to say, we’re on the brink of a paradigm shift as the greatest monetary renegotiation draws closer. To my mind, this will happen irrespective of technical low-time-frame price-swings traders tend to fixate on. The $1,000 plus daily candle is coming. Don’t miss it.
Catch you next time.
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