Bitcoin had a solid February with the price closing up about 17% and reaching breakeven on the year. The digital currency outpaced equity markets and commodities, including gold which was up 10.5% on the month.
2016 YTD Bitcoin Price Chart
Bitcoin’s performance was driven by prominent funding rounds closing in the space and announcements from global financial institutions and tech companies that they are using the technology. The use cases continue to grow as does traction.
On the negative side, the block size debate continues without a real resolution in sight. Uncertainty is never a good thing and the longer these issues linger the less likely we will see major price moves to the upside.
February Bitcoin Market Moving Events
February BITcoin Market Moving Events summary
|2/1||Japanese Financial Giant SBI Leads multi-million dollar round in Bitcoin Exchange Kraken||+1.0%|
|2/2||Goldman Sachs and IBM add money to Digital Asset Holdings round, raising total to $60 million USD||+1.0%|
|2/4||Blockstream raises $55 million USD to build out bitcoin blockchain||+5.5%|
|2/10||IBM Director declares his company “all-in on blockchain”||+4.2%|
|2/20||Majority of bitcoin miners back proposed timeline of 2017 for hard fork & segregated witness||+3.8%|
|2/22||Prominent Bitcoin companies reject miner’s plan in favor of Bitcoin Classic||-.02%|
|2/23||Japan considers regulating bitcoin as a currency||-4.6%|
|2/26||Prominent hedge fund manager Mike Hart from Corriente Advisors reveals buying bitcoin as a hedge against Chinese devaluation and capital flight.||+2.2%|
March Price Outlook
Despite a strong February, the bitcoin price has had trouble breaking resistance in the $440-$445 area. In order for a bullish breakout to occur, it is essential that the price get above these levels and consolidate. If this occurs, a break out through the December high of $464 is possible and this could pave the way for a retest of 2015’s annual high of $500.
On the down side, there has been big support around $415-$418. If that doesn’t hold, $407 and then $400 could be retested this month. The price of bitcoin has been range bound throughout the second half of February and this should resolve itself one way or the other over the next week.
Key Macro Event to Watch in March
Global central bank activity
The world’s central banks will be active this month with a focus on Europe, Japan and the United States:
- Europe: ECB data has been very weak and on March 10th they will be meeting to make important economic policy decisions on QE and further interest rate cuts.
- Japan:The Bank of Japan (BOJ) meets on March 15th. Their recent move to negative interest rates has failed to stimulate the markets and the yen has done the opposite of what most people expected and strengthened.
- United States: The Federal Reserve meets on March 16th. There is much confusion amongst economists and traders if and when the Fed will raise rates again. Another rate hike looked unlikely but now appears to be back on the table. Any announcement from the Fed and policy change will have a big impact on the markets.
The central banks seem to be leaning towards more quantitative easing and taking interest rates lower. In a world where 25% of global GDP has negative rates and currency devaluation persists (particularly in China), investing in a decentralized alternative investment such as bitcoin as a store of value is an increasingly viable option.
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