Bitcoin Forecast: Global Political Turmoil Drives BTC/USD to Record Highs

Bitcoin Key Points

• Like gold, Bitcoin is often viewed as a hedge against economic and political uncertainty, a role that is driving it to record highs to start the new week.
• The US, Japan, and France (three of the planet’s top seven economies) are facing political turmoil.
• Bitcoin is breaking out to a new record high near $125K - a close anywhere above the previous record high around 123,000 would strengthen the case for a legitimate breakout

 

Like gold, Bitcoin is often viewed as a hedge against economic and political uncertainty. When seen in this light, it’s perhaps no surprise that the cryptocurrency is trading on the front foot as we come off one of the most geopolitically-charged weekends in recent memory.

Starting with the world’s largest economy, the US government remains shut down, with little tangible signs of progress over the weekend and a pervasive unease that things will have to get worse before they can get better. Per prediction market Kalshi, traders currently estimate that the shutdown will last upwards of three weeks, which would preclude the release of next week’s US CPI report as well (in addition to a couple key initial jobless claims readings):

Source: Kalshi

If the clown show in Washington was the only element of political dysfunction, markets likely would have shrugged it off, but this weekend also brought political leadership changes in two of the other top 7 economies on the planet.

In Japan, the LDP elected Sanae Takaichi as its next leader, making her poised to be Japan’s first-ever female Prime Minister. Takaichi is a protégé of Shinzo Abe and is widely expected to reintroduce the principles of his eponymous Abenomics approach, centered on fiscal and monetary stimulus, along with corporate reforms to stimulate Japan’s moribund economy. Reading the tea leaves, traders have drastically reduced estimates of BOJ interest rate increases this year, providing a boost to risk assets and store-of-value assets.

Last but not least, today’s European session was shaken up by the unexpected resignation of French PM Sébastien Lecornu after a mere 27 days in office and less than 24 hours after the announcement of his new cabinet. Now tracking for its fifth Prime Minister in a little over a year, France continues to struggle with political instability, weighing on the euro and the country’s national bourse, the CAC-40, which fell nearly -2% on the news. Once again, the apolitical nature of Bitcoin (and gold) shine in contrast to the turmoil of traditional political institutions.

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

Looking at the chart above, Bitcoin is breaking out to a new record high near $125K as we go to press. A close anywhere above the previous record high around 123,000 would strengthen the case for a legitimate breakout after three months of consolidation and set the stage for a continuation higher toward $128K (the 127.2% Fibonacci extension of the August drop) or $134K (the 161.8% Fibonacci extension of the same move). Only a break and close back below $123K would flip the near-term bias back to neutral at this point.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX