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Bitcoin Price Analysis: Hyperinflation to push the price higher?

Second week of October has started off with a break out propelling the market to over $620 level. The bullish trend continued with the market trading all the way to $640 before turning sideways on short term frame. The market has traded scantily over the $620-$630 region with no good residual volumes. While the long term setup still looks bullish, let’s see if hyperinflation can push the prices higher for the coming week:

Fundamental Key Points:

The adoption of the cryptocurrency and its underlying technology has always been fundamentally positive for the Bitcoin ecosystem. Here are few highlights of the past week fundamentals that might continue to have effect on the prices:

  • Bitcoin Trading on LocalBitcoins surges in Europe to all time high, turnover in Turkey and Venezuela explodes due to hyperinflation
  • Japan to drop Bitcoin sales tax by 8%
  • SEC Seeks Additional Comment on Winklevoss Bitcoin ETF
  • Polish Parliament Holds Public Consultation on Cryptocurrency
  • The Russian Government is Testing Blockchain for Document Storage
  • Bank Trials Show India’s Blockchain Interest on Rise

From a macro perspective, there has been an increase in the trading volumes of Bitcoin in countries like Venezuela that are facing hyperinflation. This is because of the devaluation of the local currency; people preferred to convert savings into Bitcoin.  Economies facing recession might opt this as a way out to save value. How SEC might react to Winklevoss’s ETF request coupled by hyperinflation effects might have impact on prices of the currency.

Technical Analysis:




Long Term Trades:

The Long Term chart has been in an uptrend from the start of this year, with no sign of any set up change currently. The market has traded constantly over $630 with very low residual volumes in the range of $620 – $630. There is a strong possibility that the market might trade again in these levels to close the gap. This might be a chance to enter into a long term position around the zone of heavy support. The previous swing low of the market at $594 can be the stop with swing high at $770.89 as the target.

To get apt entry positions for the long term trade, let’s take a closer look:


On the daily chart, in the recent period the market has been trending in a channel. Eversince market failed to penetrate the $594 price due to heavy support; it has been trending upwards with middle Bollinger as support. Taking a position at middle Bollinger around $624 with $594 as stop loss and target $770 would be an ideal long term trade that can be executed with good support.

Short Term Trades:



On a daily chart, 100 SMA has now joined the zone of heavy support around $620, with the middle bolligner, 9, 13 and 34 SMAs. Market is looking to test this region before taking to the Bull Run.

On shorter time frame (4 Hrs), the Bollinger bands have broken out and the market is bearish. All the support averages have been broken and market is moving towards 100 SMA. Good short term trades with 100 SMA as target and $640 as a stop on bearish side would be feasible. Since market could to be sideways in $620- $630 range, short term trading from both sides would be feasible for some period.

While taking long term positions, keeping an eye on macro factors would be really helpful.

Decentralized vs. Fiat Currency: Identifying Failure

Decentralized Currency

Critics have cited Bitcoin’s decentralized nature as problematic to long-term investment, but this criticism deserves deeper analysis.  Notable dissenting voices include investor Warren Buffet and economist Paul Krugman.  Critics are entitled to their opinion.  In considering the potential demerits of Bitcoin, however, investors should be aware of the benefits associated with its decentralized character.  The intent of this post is to explore the failures of historical fiat currencies.  (For reference, fiat currency describes government issued and/or authorized money, lacking intrinsic value.) From fiat currency failures, the benefits of a decentralized system become clearer.

Currency Failures of the Past

Fiat currencies, similar to Bitcoin, are susceptible to shocks in value.  Since they lack intrinsic value, immaterial forces can dramatically influence their worth.  This post examines the failures of the German Papiermark, the Argentine Peso, and the Zimbabwean Dollar.

After Germany’s World War I defeat, the Treaty of Versailles mandated Germany provide war reparations to allied nations.  When Germany neglected payments, France and Belgium occupied areas of German production, which forced the German government to print papiermarks for salaries.  As the quantity of currency increased, the value of the currency decreased.  This induced a spiral of hyperinflation.

Following the 1973 OPEC oil embargo, Argentine budget and trade deficits threatened to collapse the economy.  In response to growing debt and civil unrest, the Argentine government printed money.  The value of the peso drastically decreased, until the government established a new peso to stabilize the economy.

The situation in Zimbabwe echoed that of Argentina and shutterstock_482075365Germany.  Excessive government spending and economic problems led the government to overissue currency.  The government printed Zimbabwean dollars in higher denominations as the value of the dollar plummeted.

Lessons Learned

Each of these cases shares a common denominator.  Social, geographic, and political forces contributed to devaluation, and eventual collapse, of each of these currencies.  Bitcoin is exempt from these sources of error.  As an independent, decentralized currency, Bitcoin will not face pressure from foreign governments or internal unrest.  Monetary supply is fixed, which means that supply will not respond to changes in the world.  Effectively, Bitcoin removes the element of human error.

The argument of this article is imperfect for several reasons.

  1. Historical currencies are tested under harsher conditions than Bitcoin through wider use and longer duration.
  2. This piece overlooks the benefits of monetary policy, which have been used to stabilize economies.
  3. Hyperinflation, which is the common source of failure among these currencies, could still occur to Bitcoin.

Despite these imperfections, the trend in other intrinsically valueless currencies points a finger at geo-political variables as the culprit for currency failure.  Since Bitcoin avoids geo-political variables, it may be less prone to failure.