The Trend

The Last Time This Happened, the Bitcoin Rally Died

With a simple click in 2009, a digital currency craze was born. 

All of a sudden, a peer-to-peer system of electronic cash popped up out of nowhere.

Governments and central banks couldn’t manipulate it. 

No bank.  No fee.  No inflationary worry.  It was simply valued by user confidence. 

It was used to move money around the world anonymously, without fear of falling under any one’s authority, thus making it quite attractive. The renegade currency - as described by the US Department of Justice - protected many from a decaying dollar, which terrified politicians. 

Governments feared it could end paper money.

Users no longer had to worry that a team of hackers would steal their credit or debit card information. They could buy anything they wanted online without credit or debit card information without worry of leaving a single trace.

Folks now had the added benefit of crypto-currency, or virtual currency that uses cryptography for security measures, making it impossible to counterfeit.

It’s no surprise the crypto-currency has spread like wildfire.

Nowadays, the most popular one, the bitcoin,  is nearing $1,100 (as seen in this chart from Coinbase Inc.) – nearly reaching parity with gold.

But the last time the currency reached parity at $1,100 in 2013, it pulled back to $200 not long after.  At the moment, though, it’s as good as gold. 

After a 125% rally in 2016, it’s been boosting by increased demand in China on the heels of currency weakness.  It’s also appealing to those in India, where the Prime Minister removed higher denomination bank notes from circulation.

In short, a perceived war on cash and capital control is making it much more attractive. 

Be careful, though. 

Even with China imposing limits on capital movements, i.e. controls, which is keeping the bitcoin high, the country could change that at the flip of a switch.  If China mandates the bitcoin is no longer a ways to transfer capital, there is risk of a sharp drop in valuation.

If not, and the shenanigans continue in China, the crypto-currency could explode higher.  Just be careful, though.  Rallies don't last forever.