Bitcoin: FOMO, Headlines, And Technicals

What really drives the price of Bitcoin? (I’m taking away the obvious answer…supply and demand.) From what I can determine, it comes down to 3 things, ironically the same three things that are driving the stock market at the moment: FOMO or Fear of Missing Out headlines, and technicals. 

FOMO

Back in early 2017 when Bitcoin first made its name to the general public, FOMO was rampant. As is well documented, price moved from roughly $1000 at the beginning of that year to near $20,000 by year-end. I remember being at holiday parties in December 2017 and having people ask me about cryptocurrencies such as Bitcoin, Ethereum, and Ripple. Even my brother, a plumber, was asking about it. (It is considered a contrarian indicator when people outside of the financial community begin asking about a financial instrument that they usually would not know about.)We all know how that story ended as BTC ended the year near $4,000. 

Headlines

Since the beginning of 2019, its been mainly headlines that have been causing BTC to bounce. Remember when Facebook announced they were going to jump into the Blockchain technology with Libra? The price of BTC bounced to $14,000.   After that, China said they would investigate blockchain technology and so did the UK! (FOMO was involved in all these events as well).Who knows, new ECB President Lagarde is set to speak tomorrow and theoretically, she can mention blockchain technology as well. The one thing to note on each of these headlines is that the bounces were lower than on the previous headline, and the eventual selloffs have brought us down to today’s levels, near $7,500. 

Technicals

On a weekly chart, Bitcoin has been in a large symmetrical triangle since putting it the highs back in late 2017. After putting in a low in 2018, price bounced on the Libra news, only to begin trading lower again. (Notice the upper wicks on the weekly candles throughout this year. These long wicks may be attributed to those to bought in late 2017/early 2018 and were looking to cut their losses.)  Price has retraced to the 61.8% Fibonacci level from the lows in January to the highs in June.BTC is just above its 50-week moving average of $7,172 and there is a support zone just below between $6.000 and $7,000.But notice where price is within the triangle. If BTC continues to trade within the triangle, price may not breakout until 2021!

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