The 2016 year was very successful for Bitcoin. During this period the BTC/USD quotes increased more than twice. The digital currency hit a historic high of 1,000 USD. In this article, we try to understand why the cryptocurrency will remain a good tool for long-term investment in the near future.
Why Bitcoin is growing so fast
1 – Demand from China
Most experts agree that the sharp rise in prices for Bitcoin came mainly from China. The main reason is a significant drop in the stock market in the country in mid-December 2016. The Chinese Government has imposed restrictions to the insurance companies investments in the Chinese securities. As a result, the Shanghai Composite Index lost more than 3% over the two weeks. In addition, over the past 12 months, the yuan devaluation was approximately 7%. These events have significantly increased the demand for cryptocurrency as an alternative means of savings.
2 – Bitcoin security strengthening and boost in confidence in the digital currency
The BTC/USD trading instrument has a higher volatility compared to major world currencies. However, over the past year, the cryptocurrency volatility decreased significantly. Emergency shutdowns of Bitcoin currency exchange, attempts to crack exchanges, as well as a variety of hacker attacks, do not create such a panic as a few years ago. The level of confidence in the currency has increased considerably. People have started to buy and hold the digital currency.
3 – Instability in the world
The instability of financial markets, unexpected Brexit and presidential elections in the US, led investors to seek alternatives for saving their money. All these developments led to a sharp increase in demand for Bitcoin. In early 2017 BTC/USD has broken its own price record.
4 – Availability for ordinary users
More and more companies are trying to make Bitcoin more available for the average consumer.
Bitcoin is still quite specific currency. It is not like our usual assets such as stocks, bonds, ETF, traditional currency pairs. Bitcoin can not participate in physical transactions as cash. Most people do not fully understand how it functions and what prospects it has. At the same time, we are seeing a significant breakthrough in the development of the cryptocurrency over the past few years. We believe that the Bitcoin user base will grow exponentially, causing an increase in demand and prices for the cryptocurrency.
A few points that may help Bitcoin enter the mainstream in the near future should be highlighted:
5 – Release of the «Banking on Bitcoin» film
This documentary tells about the cryptocurrency evolution – the brightest digital invention after the Internet. He also highlighted the most important representatives of the industry, such as Charlie Shrem (founder of Bitcoin Foundation and BitInstant), Barry Silbert (CEO of Digital Currency Group), Erik Voorhees (founder ShapeShift.io) and others.
6 – Development of Bitcoin ETF
ETF (Exchange Traded Fund) – stock investment fund – is a group of open-ended investment funds, the shares of which are traded on the stock exchange. They allow investors to diversify their funds by geographic regions, sectors and asset classes. The price dynamics of ETF reflects the price dynamics of a particular underlying asset.
Over the past 10 years, the rapid growth in the industry of stock funds has occurred. Assets under management increased by 24 times. To date, the total number of registered ETF on the major US stock exchanges in Europe and Asia exceeds 4,500.
Currently, there are two Bitcoin funds – Bitcoin Investment Trust and Pantera Bitcoin Advisers LLC. These are closed-end funds, they are only available to large investors.
In the near future, the emergence of Winklevoss Bitcoin ETF is expected. Its creators are Cameron and Tyler Winklevoss twins. The main mission of the Winklevoss Bitcoin ETF is to make the process of investing in Bitcoin simple and affordable for ordinary people. The fund will operate on the principle of a standard commodity ETF: the investor will purchase Bitcoin in exchange for ETF shares. Now Winklevoss Bitcoin ETF is considered by the Securities and Exchange Commission in the United States (SEC).
7 – Limited resources
Bitcoin main value lies in the fact that its emission is limited to the amount of 21 million.
The above-mentioned factors will contribute to the popularization of the digital currency among ordinary users. This can cause a real demand for the cryptocurrency that will significantly increase its value. We believe that in the long run, one should buy BTC/USD for a rise.
Current trading idea for BTC/USD
Support levels: 760.000
Resistance levels: 890.000, 995.000, 1085.000
At the beginning of the year, the correction by more than 20% was observed in BTC/USD. The trading instrument has found support at 760.000. Purchases have prevailed on the market during the last trading sessions. The price reached the resistance level of 890.000. At the moment, the indicators point to a continuation of the upward trend: the price is fixed above the 50 MA and 200 MA; the MACD histogram has started to rise and moved into the positive zone.
One should consider buying of BTC/USD if the price consolidates above 890.000. The nearest goal for profit is 995.000 and 1085.000. In the long term, we expect further growth of the BTC/USD quotes.
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