Ethereum Hard fork and Yuan Devaluation push Bitcoin prices higher, strong correction to follow?
For some time, the month over month price of Bitcoin has been on the rise and the trend has been consistent. It is a recognized pattern that due to onset of some factors the Bitcoin prices tend to break out during the fag end of the month. For the month of September while the break out was purely technical, October had a couple of major factors. Let’s look into these factors, how they have influenced the price and what might be the further price movement:
The International Monetary Fund announced the launch of the new Special Drawing Right (SDR) valuation basket on October 1st. This basket now includes the Chinese renminbi making it the fifth currency in the SDR basket. China is noted to have a credit fueled growth. Most of the Heavy industries in the leading sectors are escaping the inflation by exporting their products abroad. But for China to fit in with other currencies in the basket, it has to depreciate Yuan. They have been holding off this move as they were in the review period by IMF. Now that they have bagged the SDR, they have started to devalue Yuan slowly but consistently. The first wave of the move was observed in the last week of October which prompted the Bitcoin prices to go up.
Ethereum Hard fork:
A hard fork is a change to the underlying Ethereum protocol, creating new rules to improve the system. After consensus is reached on what changes should be included in a hard fork, changes to the protocol are written into the various Ethereum clients. Since September 18th (UTC), the Ethereum network has been under attack by a person or group resulting in large delays before transactions were processed. The network is currently filled with pending transactions which is causing users delays in processing their transactions. Hence both Ethereum and Ethereum Classic have Hard forked on 18th and 25th of October respectively. This might be one of the major reasons why increased trading volumes and higher prices were observed in Bitcoin.
Bitcoin to see correction:
Owing to the above major factors, the cryptocurrency has risen beyond the $700 levels in the last week of October. But one concerning factor to this uptrend is the fact that the rise has been meteoric and not organic. The break out from $620 to $640 levels saw the prices coming down again to compensate for the lack of volumes in that region. Similarly the break out to above $700 levels saw very few volumes. This might compel the market to trade sideways in the void region for some time in the form of correction. Later the genuine uptrend might continue taking the prices further higher.