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Bitcoin Forecast: Why BTC Will Go Up In Summer 2020

Published 12/27/2019, 06:16 AM

2020 is just around the corner and it's time to think what it will be potentially remembered for and how it may affect the future dynamics of the world's first and most widely used digital asset.

In 2019, a significant deterioration in the global economic environment led to talks about an impending financial crisis, which would hit the global economy. It is worth noting that in addition to a trivial manufacturing recession in the world’s leading economies and escalating trade tensions between the U.S. and China, there were much more convincing leading indicators that the tough times are approaching.

Among them is such macroeconomic phenomenon of the debt market as the inversion of the yield curve of bonds with different terms to maturity - long-term and short-term. In fact, the global market faced an abnormal situation in which short-term securities have higher yields than long-term instruments. This means that investors seriously considered that the situation might significantly deteriorate in the near future. In other words, investors began to invest heavily in securities with longer maturity and increased demand for these government bonds resulted in a lower yield. At the same time, 2-year bonds yield, on the contrary, began to increase due to lack of demand, as is usually the case with long-term bonds in normal market conditions.

Historically, an inverted yield curve has been regarded as a sign of an impending economic recession. When did the inversion occur? The yield on 3-month bonds was higher than the yield on 10-year bonds back in March 2019. After that, the situation went back to normal for a short while, and then the yield curve became negative again. The thing is that the inversion itself does not give a clear signal when the recession sets in. The yield curve between 3-month and 10-year treasuries inverted in 1965, but the recession in the United States began only four years later.

In 1971, this indicator became negative again, but the economy slid into recession only two years later. In 1978, 15 months had passed before the recession began, in 2000 - 8 months. From all these numbers we can determine the average value, which would correspond to a period of 15 months. That is, on average over the past 60 years, the crisis came in a year and three months after the inversion of the yield curve. Given that the yield on 3-month bonds became higher than the yield on 10-year bonds in March 2019, the next crisis may occur in June 2020.

Now, let’s consider how all this may affect Bitcoin and its exchange rate. It's simple: every time when the global stock market is expected to decline, demand for Bitcoin increases. The S&P 500 index had been falling for the whole month in May. At that point, Bitcoin gained momentum and jumped to $ 8,000. After that, BTC was bolstered by the news about the U.S.-China trade war, as well as the likelihood of a hard Brexit.

At the same time, when it was announced that the U.S. and China were ready to sign a trade deal, the BTC/USD plummeted. Such development clearly indicates that BTC has long been deemed as a safe haven asset. The demand for this digital coin increases every time something threatens the world economy and the traditional banking system.

All in all, if our forecast confirms and the next financial crisis does begin in the summer of 2020, we will be buckling up for a new bullish rally and expect the BTC to skyrocket above $10 000 again.

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