The Bitcoin Week: Bitcoin Mania Continues as Prices Remain Near All Time High

Demand from retail investors topped expectations and saw the futures exchange halt trading twice in an effort to control volatility. CBOE’s website also crashed under the volume of traffic. Commentators were quick to point out that the crash corresponded with a spike in the Bitcoin price (the currency jumped from $14,500 to $15,736 in a matter of minutes), confirming that futures demand will likely drive Bitcoin price, and vice versa.

Sunday’s contract launch is a key step in the cryptocurrency’s journey towards mainstream, legitimate trading instrument. Bitcoin’s lack of intrinsic value – it is not tied to a physical asset or backed by a Central Bank – and massive speculative bubble remains a concern for many. A number of high profile commentators are on record discussing the cryptocurrency in less than favorable terms. However, for the moment at least, the currency continues to demonstrate an impressive resilience to such negativity and has so far weathered pessimistic statements from the likes of JP Morgan’s Jamie Dimon and, just yesterday, UBS’s Paul Donovan.

That said, concerns over its legitimacy have done little to deter the Bulls, as evident from the current price action. With prices breaking above $17,000 on Tuesday and Bulls showing no signs of tiring, we may even see Bitcoin conclude 2017 on $20,000. Bitcoin is trading at $16559, up +0.94 as of 10:00 GMT.

Dollar higher ahead of FOMC

The greenback flexed against a basket of major currencies during yesterday’s trading session, as optimism in US tax reforms continues to pick up the pace. While, on the face of it, Bulls are firmly in control, sluggish US inflation could yet present a headwind for the current upside.

With the recent wage growth figures in November printing below market estimates, the Dollar remains vulnerable to losses as for today’s FOMC statement dawns. Investors’ attention will be focused on Yellen’s last address, which is widely expected to conclude with the Federal Reserve raising US rates by 25 basis points.

Optimism from policymakers over the US economy is likely to support the greenback. Alternatively, if the tone of the meeting centers on concerns over low inflation, or fails to shine a light on Fed plans for rate hikes in 2018, the Dollar may find itself subject to selling pressure.

From a technical standpoint, the Dollar Index looks somewhat bullish on the daily charts, with prices breaking above 94.00 during Tuesday’s trading session. A decisive daily close above 94.00 could encourage a further incline towards the 94.50 mark. Alternatively, weakness below 93.70 may open a path towards 93.50.

Commodity spotlight – Gold

It’s shaping up to be another painful week for the yellow metal, which tumbled to $1240 on Monday and Tuesday – its lowest level in nearly five months. Gold continues to trade near the five-month low on Wednesday morning.

US tax reform optimism is the likely instigator of this fall, although a strengthening Dollar likely added to the downside. Yellen’s press conference today may pave the way for yet more punishment and, if FOMC hawks take to the stage, $1230 could become the next level of interest.

Taking a look at the technical picture, Gold is heavily bearish on the daily charts. There have been consistently lower lows and lower highs, while the MACD is trading to the downside. Previous support around $1250 may transform into a dynamic resistance that encourages a further decline towards $1230.

This article is written by Lukman Otunuga, a senior analyst at FXTM