In recent weeks, the buying pressure on Bitcoin has been gaining attention. However, there is another source of potential demand that is emerging and it might be the largest one yet.
The Known Sources of Demand
There are several well-known sources of demand for Bitcoin in the current market cycle. These include the Bitcoin ETFs, MicroStrategy issuing more shares to buy more Bitcoin, Tether's constant buying, and the upcoming halving event. For instance, in just the first two weeks of trading, the "newborn 9" accumulated 125,000 BTC. While this has been offset by outflows from the Grayscale Bitcoin Trust (GBTC), it is unlikely that all GBTC holders are eager to sell. As a result, this outflow is expected to decrease in the coming weeks.
An Unexpected Development in China
China, despite its previous ban on Bitcoin in 2021, is now experiencing an interesting development. Readers who are familiar with my content on Bitcoin and Markets will know about the changes happening in China over the past couple of years. The country is going through a transition in its economic model, which has been heavily reliant on debt and producing goods for over-indebted foreign customers. However, this era is coming to an end, as evidenced by the crash of the Chinese real estate market and their stock market.
China Asset Management Company (China AMC), a major fund manager and ETF provider in China, recently halted trading on their Nasdaq 100 and S&P 500 ETFs to prevent money from flowing out of other funds and into these US-connected funds. This move has caused other US-connected ETFs on Chinese markets to open at a premium. Chinese investors are now in panic mode, and it's only a matter of time before they turn to Bitcoin as a store of value and for its portability. Despite the official ban on Bitcoin in mainland China, investors can still access it through exchanges like Binance and OKX, as well as through OTC and off-shore bank accounts. Hong Kong, which has publicly embraced Bitcoin, is also likely to continue supporting the cryptocurrency rather than banning it.
European Markets and Bitcoin
The European markets are also facing challenges, with many countries already in recession. Germany, for example, narrowly avoided a technical recession despite negative GDP growth. In a world of capital flight and negative growth, Bitcoin becomes an attractive option for investors. Bitcoin's unique properties as a revolutionary technology, a fixed supply asset, and its potential for economic growth make it an appealing choice for capital seeking a safe haven.
Bitcoin's Price Performance and Future Outlook
Bitcoin's price performance has been lackluster since the ETF launch. However, considering the significant selling pressure from entities like FTX receivership and the rotation into lower capital fees of new ETFs, the price has held up remarkably well. The Relative Strength Index (RSI), a widely used indicator, has become a focal point for traders and bots. Until the daily RSI breaks above 30, significant upside in price is unlikely. There is a possibility of a hidden bullish divergence, where the price makes slightly higher lows while the RSI makes lower lows. However, with the current demand factors described above, significant downside is also unlikely.
Looking at the daily chart, the 100-day moving average (DMA) is providing support, and the $37,877 level from November is a key price to watch. As long as the RSI remains above oversold levels, any dips in price are not expected to close below that level.
While the 100-day DMA typically does not provide strong support for Bitcoin, there is a precedent from September 2020, where it played a significant role before the monster bull rally at the end of the year. It is possible for Bitcoin to hold along the 100-day DMA and rally with a pause in GBTC selling. However, it is important to note that this is not the base case scenario.
In conclusion, we are witnessing significant and new sources of demand for Bitcoin, including the ETFs and the capital flight from China. Despite the complexities surrounding the ETF launch, the price of Bitcoin has remained relatively stable. It is only a matter of time before this demand becomes evident in the price of Bitcoin.
Frequently Asked Questions
Are gold investments a good idea for an IRA?
Anyone who is looking to save money can make gold an excellent investment. It is also an excellent way to diversify you portfolio. There's more to gold that meets the eye.
It has been used throughout history as currency and it is still a very popular method of payment. It is often called “the oldest currency in the world.”
But gold, unlike paper currency, which is created by governments, is mined out from the ground. It is very valuable, as it is rare and hard to create.
The supply and demand factors determine how much gold is worth. When the economy is strong, people tend to spend more money, which means fewer people mine gold. As a result, the value of gold goes up.
On the flip side, people save cash for emergencies and don't spend it. This causes more gold to be produced, which lowers its value.
It is this reason that gold investing makes sense for businesses and individuals. You will benefit from economic growth if you invest in gold.
You'll also earn interest on your investments, which helps you grow your wealth. If gold's value falls, you don't have to lose any of your investments.
What are the benefits of a Gold IRA?
An Individual Retirement Account (IRA) is the best way to put money towards retirement. It will be tax-deferred up until the time you withdraw it. You can decide how much money you withdraw each year. And there are many different types of IRAs. Some are better suited for people who want to save for college expenses. Some are for investors who seek higher returns. Roth IRAs, for example, allow people to contribute after they turn 59 1/2. They also pay taxes on any earnings when they retire. Once they start withdrawing money, however, the earnings aren’t subject to tax again. This account may be worth considering if you are looking to retire earlier.
Because it allows you money to be invested in multiple asset classes, a ‘gold IRA' is similar to any other IRAs. Unlike a regular IRA that requires you to pay taxes on the gains you make while you wait to access them, a gold IRA does not have to do this. People who want to invest their money rather than spend it make gold IRA accounts a great option.
Another advantage to owning gold via an IRA is the ease of automatic withdraws. This eliminates the need to constantly make deposits. To ensure that you never miss a payment, you could set up direct debits.
Finally, gold is one of the safest investment choices available today. Because it's not tied to any particular country, its value tends to remain steady. Even in economic turmoil, gold prices tends to remain relatively stable. Therefore, gold is often considered a good investment to protect your savings against inflation.
What is the best precious metal to invest in?
This question is dependent on the amount of risk you are willing and able to accept as well as the type of return you desire. Although gold has been considered a safe investment, it is not always the most lucrative. For example, if you need a quick profit, gold may not be for you. Silver is a better investment if you have patience and the time to do it.
If you don’t desire to become rich quickly, gold may be your best option. Silver might be a better investment option if steady returns are desired over a long period of time.
Can I hold physical gold in my IRA?
Gold is money. Not just paper currency. It is an asset that people have used over thousands of years as money, and a way to protect wealth from inflation and economic uncertainties. Today, investors use gold as part of a diversified portfolio because gold tends to do better during financial turmoil.
Many Americans today prefer to invest in precious metals, such as silver and gold, over stocks and bonds. While owning gold doesn't guarantee you'll make money investing in gold, there are several reasons why it may make sense to consider adding gold to your retirement portfolio.
Gold has historically performed better during financial panics than other assets. The S&P 500 declined 21 percent during the same period. Gold prices increased nearly 100 per cent between August 2011 – early 2013. During turbulent market conditions gold was one of few assets that outperformed stock prices.
Another advantage of investing in gold is that it's one of the few assets with virtually zero counterparty risk. Your stock portfolio can fall, but you will still own your shares. However, if you have gold, your value will rise even if the company that you invested in defaults on its loans.
Gold provides liquidity. This means you can easily sell your gold any time, unlike other investments. It makes sense to buy small quantities of gold, as it is more liquid than other investments. This allows one to take advantage short-term fluctuations within the gold price.
What does a gold IRA look like?
The Gold Ira Accounts are tax-free investment options for those who want to make investments in precious metals.
You can buy physical gold bullion coins at any time. To invest in gold, you don't need to wait for retirement.
You can keep gold in an IRA forever. Your gold holdings won't be subject to taxes when you pass away.
Your heirs will inherit your gold, and not pay capital gains taxes. And because your gold remains outside of the estate, you aren't required to include it in your final estate report.
To open a IRA for gold, you must first create an individual retirement plan (IRA). Once you've done that, you'll receive an IRA custody. This company acts as a mediator between you, the IRS.
Your gold IRA custodian can handle all paperwork and submit necessary forms to IRS. This includes filing annual reports.
Once you've set up your gold IRA, it's possible to buy gold bullion. The minimum deposit required to purchase gold bullion coins is $1,000 The minimum deposit is $1,000. However, you will receive a higher percentage of interest if your deposit is greater.
You'll have to pay taxes if you take your gold out of your IRA. If you are withdrawing your entire balance, you will owe income tax plus a 10% penalty.
You may not be required to pay taxes if you take out only a small amount. However, there are exceptions. However, there are exceptions. If you take 30% or more of your total IRA asset, you'll owe federal Income Taxes plus a 20% penalty.
You shouldn't take out more then 50% of your total IRA assets annually. You'll be facing severe financial consequences if you do.
What is the value of a gold IRA
There are many advantages to a gold IRA. It's an investment vehicle that allows you to diversify your portfolio. You can control how much money is deposited into each account as well as when it's withdrawn.
You can also rollover funds from other retirement accounts to a gold IRA. This makes for an easy transition if you decide to retire early.
The best part? You don’t need to have any special skills to invest into gold IRAs. These IRAs are available at all banks and brokerage houses. You don't have to worry about penalties or fees when withdrawing money.
But there are downsides. The volatility of gold has been a hallmark of its history. It's important to understand the reasons you're considering investing in gold. Are you looking for safety or growth? Do you want to use it as an insurance strategy or for long-term growth? Only then will you be able make informed decisions.
If you plan on keeping your gold IRA alive for a while, you may want to consider purchasing more than 1 ounce of pure gold. One ounce doesn't suffice to cover all your needs. Depending on your plans for using your gold, you may need multiple ounces.
A small amount is sufficient if you plan to sell your gold. You can even get by with less than one ounce. However, you will not be able buy any other items with those funds.
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- 7 U.S. Code SS7 – Designation of boards for trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement plans
Tips for Investing with Gold
Investing in Gold is a popular investment strategy. This is because there are many benefits if you choose to invest in gold. There are several ways to invest in gold. Some people choose to purchase gold coins physically, while some prefer to invest with gold ETFs.
You should consider some things before you decide to purchase any type of gold.
- First, make sure you check if your country allows you own gold. If your country allows you to own gold, then you are allowed to proceed. Or, you might consider buying gold overseas.
- You should also know the type of gold coin that you desire. You have options: you can choose from yellow gold, white or rose gold.
- The third factor to consider is the price for gold. Start small and move up. One thing that you should never forget when purchasing gold is to diversify your portfolio. Diversify your investments in stocks, bonds or real estate.
- Remember that gold prices are subject to change regularly. Be aware of the current trends.
By: Ansel Lindner
Title: China Emerging as Surprising Source of Bitcoin Demand
Sourced From: bitcoinmagazine.com/markets/china-emerging-as-surprising-source-of-bitcoin-demand
Published Date: Tue, 30 Jan 2024 19:02:41 GMT