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Bitcoin prices are stabilizing near the $6,500 level, but continue to trade under pressure.  Additional outlets are continuing to pop up which should help the liquidity associated with crypto currencies. Volume has declined substantially since BTC reached up to 19,000 in December of 2017, but the addition of futures contracts should continue to drive liquidity. The value of bitcoin is beginning to bounce relative to gold.

New Chicago Mercantile Exchange Partner Introduces Futures

A New company which is regulated by the Financial Conduct Authority, introduced bitcoin cash futures.  The new contracts issued by Crypto Facilities, will join their current offering of Ethereum, Ripple and Litecoin futures.  The broadening of this offering will allow traders to add to their arsenal of trading products. Crypto Facilities is a partner of the Chicago Mercantile Exchange, the largest U.S. futures clearing house. In fact, the Crypto Facilities price, which was what drove the two bitcoin price indices, include the CME CF Bitcoin Reference Rate and CME CF Bitcoin Real Time Index.


Bitcoin Valuation

One of the ways to evaluate bitcoin prices is to compare it to currencies other than the U.S. dollar. Bitcoin is attempting to find support against the greenback, but like all forms of currency during this recent crisis, cryptocurrencies have tumbled against the U.S. dollar. Since cryptocurrencies do not have an interest rate, similar to gold, they can be compared to gold as a form of a currency. The dollar on the other hand, has rising interest rates. This makes the dollar more attractive relative to bitcoin, gold and other currencies that do not have rising interest rates. Rising rates are attractive because they pay you a fee for holding on to them.  If you hold the US dollar for 3-months in comparison with cryptocurrencies, you could earn 2% annualized by default. This means that bitcoin has to rise 2% over a 1-year period to offset the benefit you would have if you held US dollars.

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Bitcoin Versus Gold has Been Rangebound

Bitcoin prices versus gold have been range bound for the past 6-months, but have not broken down as it did versus the dollar. Gold has also been under pressure, as the dollar has been the beacon of safety. That’s because the Federal Reserve continues to normalize interest rates. Bitcoin prices versus gold have remained in a 4.2 bitcoin range between 4.6 and 8.8.  Bitcoin prices versus gold are now at the bottom end of the trading range and are likely to rebound to the other end of the trading range.

As demonstrated in the graph below, momentum on the bitcoin/gold pair is poised to turn positive as the MACD (moving average convergence divergence) index generates a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The relative strength index (RSI) has been moving higher in tandem with the bounce in the ratio, which reflects accelerating positive momentum.

Bitcoin vs Gold

[Top Featured Image – UnSplash/Andre Francoi]

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