The price of bitcoin jumped 13.27 % this month as the Chinese yuan hit its lowest value in 6 years. The devaluation of the yuan, combined with a slow stock market and strict capital controls has made bitcoin appealing to Chinese investors.
The IMF added the Chinese yuan to the SDR basket of reserve currencies. The recent devaluations may be the result of China’s central bank changing its monetary policy to make the yuan a free floating currency.
The BTC/CNY markets have a slight 1% price lead over the USD markets. China generally takes the lead on most bitcoin bull trends. During the last two bull trends China had a 10% price lead during peak momentum. Chinese exchange Huobi is currently leading the charge for trading volume. Potential wash trading aside, Huobi is showing the highest volume in 7 months.
Bitcoin has been on a larger bull trend over the past year, at a much healthier pace than the parabolic spike of 2013. The bitcoin price has slowly recovered to the same levels before the Bitfinex hack. There’s a lot of resistance around the $700 area and a breakout could lead to accelerated momentum, similar to the break of $500.
In the event of a high volume breakout above $700, bitcoin may gain enough momentum to retest the highs around the $1000 area. If the markets don’t gain enough momentum, then it’s possible we’ll form a larger consolidation pattern like an ascending triangle.
In a previous market report, I had mentioned sending out a trade alert for longing the $600 breakout. That initial green candle spike was an indication that the markets were starting the front side of another bull trend.