Last night I sold my Bitcoins at €1074.93 for a short term 5% correction in Bitcoin and was off by 0.80 Euro Cents. Bought them back at a cheaper Price and was pleased to see how strong the market was acting. Just as I was suspecting. The way I was reading the charts, I was scared not being in because we were entering the blow-out phase. This means in the last 10% of the bull phase you have the possibility of making 90% of the profits and we've bin making already a handsome amount.
Now to my reasoning why we had this over correction. The currency market as you have maybe read in different news outlets or blogs is in my mind not the problem. We know for certain political reasons out of the USA that Interest rates will be going up trying to support a strong US Dollar but the German 10 year yields suggest Interest rates are also going up. This is supporting a stronger Euro. But this also isn’t the problem.
The Chinese intervened in the Yuan today we now that, and yesterday the chart new it ahead of time that the Yuan was going to get a lift up because it stopped its down trend. The Government is trying to get a grip on the flight of money out of their China. 2016 the sum equvalent of $730 Billion Dollars left the land. The 4 Trillion $ Reserve shrank to 3 Trillion $ already because the Chinese are trying to support the Yuan. That is the problem instead of letting the Yuan float.
Normally if you have currency reserves you should undertake for instance currency swaps between central Banks. Yuan Dollar Swaps or Germany has also an Export surplus there fore Euro Dollar Swaps. If you do not do that, and buy Treasury Bills with the Reserves, that is fine. Nothing but a loan. If you then sell Treasuries or us the other Reserves to support your currency, you are actually taking a lose on the Exports were to fore you had made money. This is the case with China. I am not an Economist, but if you used up 25% of your Reserves for nothing, did you just lose 25% of your prior Export profit.
What happened now to Bitcoin. It is not the strengthening of the Yuan as you can see in the link when comparing the price action of Bitcoin. A percent up or down dose not matter, there are other reasons for the flight of money and the Government knows this. Bitcoin was actually not even reacting to the stop of the Yuan devaluation. Take a look at the Huobi Exchange Volume it hardly gives reason for a crash. During the crash the average volume hardly changed. What probably happened is that the Chinese sold themselves … either Bitcoin on the American Exchanges and European Exchanges which they might of bin accumulating, or they Shorted the Market with derivatives . That is what the Bitcoin Volume tells us in Euro and Dollar Bitcoin charts. This is how you bring a market down through leverage up to 100 X (times). 80% of volume is in China. So you choose a thinly traded market to cause havoc. US and Europe.
The trend is definitely going toward Bitcoin and total volume backs that up. No one has any Interest bringing Bitcoin down. Actually not even China. They know of the benefits of this Technology. They were just trying to buy some time very expensively. The Market dose not Believe that the Yuan can gain strength. It is the trade of the year to short the Yuan and still is once the PboC gets out of the market again. The Government can not afford to support the Yuan in the long term.
Just like the Swiss couldn't peg their Swiss-Frank to the Euro for ever. It cost therm also a big fortune.
Bitcoin has stabilized and will most likely continue to go up in price in a few days.
This is an update from last night. I've added a few comments and corrected some spelling. Thanks for your support.
06.01.2017 11:43