The rise in the price of bitcoin, which has moved from a low near $3,200 at the end of 2018, to above $12,000 in June of this year, appears to have paused significantly over the summer.
How does this lull compare to pauses that occured in previous bitcoin price cycles? At this stage in each of the three previous bitcoin price cycles, the price increase paused for several months after the first two or three doublings from the start-of-cycle lows, before continuing upward.
In late July of this year, in an attempt to push money into the economy to avoid a feared recession, the United States Federal Reserve Bank lowered the inter-bank-funds interest rate by a quarter point from 2.25% to 2.00%. After a short-lived rally from around $10,000 to near $12,000 in early August, the price of bitcoin had fallen back to $9,500 by late August. In mid-September, the Fed cut rates by another quarter-point, to 1.75%, and in the hours that followed, the price of bitcoin fell from the $10,000 range to the mid-$9,000s. By the following week it had dropped further, to the $8,000 range. And when the Fed cut rates another quarter-point, to 1.5%, in late October, within four weeks bitcoin had fallen to below $7,000.
Bitcoin Value Theory
One bitcoin-value theory holds that easing of government currency (such as dollar, yen, euro, or yuan) boosts the strength of limited-supply assets and currency such as bitcoin, or gold. As interest rates are pushed lower and dollars become less expensive and more available, the value of limited-supply assets such as bitcoin increases. Pushing dollars into full-employment economy of the United States leads to more dollars chasing the same amount of goods (bread, gasoline, houses), which leads to consumers bidding up prices for those goods. This is very noticeable in the residential housing market, where prices of for-sale properties increase or decrease as buyer access to cash and credit increases or decreases.
Are you happy with your finances? Or are you looking for the next step? Something better.
Are you satisfied making the same money as you have for the past ten or twenty years, even though the prices of everything from a loaf of bread to a gallon of gasoline to a new house have doubled or tripled?
Bitcoin is where global finance meets your personal finances, where the global economy meets the money in your pocket.