Bitcoin surged over 1000% in 2017, along with many cryptocurrencies that had a four digit performance, even through many analysts and investors defined the market as a bubble ready to burst any time. Over the course of 2017 alone we had dozens of those warnings: Jamie Dimon, CEO of JPMorgan Chase, said “Bitcoin is a fraud and is in a valuation bubble that will burst”; Jeremy Grantham, an investor who predicted last two big market crash, said “Bitcoin is a bubble that may crash soon”; the economist Jim Rickards warned Bitcoin “It’s on its way to zero – somewhere between zero and $200”; the billionaire Mark Cuban said in a tweetstorm “I think it’s in a bubble. I just don’t know when or how much it corrects. When everyone is bragging about how easy they are making $=bubble”.
Many people have given their opinions on Bitcoin, as the cryptocurrency market attracted the attention of institutional investors and governments, and we can also find many opposite declarations, some of which claimed “Bitcoin is essentially ‘digital gold’ for millennials, and the cryptocurrency could easily achieve the $100,000 range”.
Bitcoin’s prices are driven by many factors, whose government regulation is one of the most important, and while it’s nearly impossible to predict if and when any important government will regulate Bitcoin, recent consolidation gives us some indication on what to expect in the short and medium term.
Bitcoin: important indications from the technical analysis
On Bitcoin’s monthly chart we can see a long upper shadow on December candle, when Bitcoin hit an all time high at $20.000 and soon afterwards prices moved down quickly. The long upper shadow tell us the uptrend was exhausted, and now bulls and bears are fighting to determine a fair value, while this pattern is often followed by an opposite trend or consolidation.
As we can see on the daily chart, Bitcoin’s prices are now moving sideways, for the first time in 12 months, in the channel 20.000-12.500. The breakdown of the support at 12.500 will push prices to test the 10.000 level, which should act as a psychological support, but in case of breakdown prices could drop quickly towards 5.000.
We expect Bitcoin to move sideways in those first months of 2018, while the strong uptrend shouldn’t be resumed anytime soon.