Bitcoin is testing a critical support: buy opportunity or the collapse will continue?

Bitcoin broke a critical support, and it continues to fall down. Credit: tradingview/TBGlobalist

UPDATE 06/02/2018: Bitcoin breakdown in the morning  through the up-trend line, but afterwards prices are staring to rebound as the cryptocurrency hit a low at $5900, nearby the first important support we drawn on the daily chart.

ORIGINAL STORY

People who invested in Bitcoin in December are probably living one of their worst nightmare. In 2017 Bitcoin, along with other cryptocurrencies, had an impressive rally that has been matched only by few stocks. With a return over 1000 percent on one year basis, the crypto market reached its euphoria phase in the last quarter of 2017, when Bitcoin quickly rose from $3500 to $20000 in only 3 months. 

At that time was nearly impossible to predict Bitcoin’s peak or direction, with analysts and brokers often divided between pessimists – with many alarming that Bitcoin is a bubble – and optimists – some of them said Bitcoin could reach $100.000. Many financial experts started to mark Bitcoin as a bubble in early 2017, when the most famous cryptocurrency was just about to broke $1000 psychological resistance.

Those pessimists have continued to alarm the crypto market during the whole 2017, helping to fuel a crying wolf situation, in which people ignored any kind of warning, even when prices were about to reach the all time peak. We at The Business Globalist released a technical analysis on early January, in which we pointed out that a big upper shadow on December’s candle was a clear sign the bullish was exhausted, and we experienced the rage of Bitcoin supporters.

And while many people are now experiencing with their own money that nothing goes up forever in the financial market, included cryptocurrencies, many are now trying to understand if the market will fall deeper or if it’s now a good buy opportunity. We’ll give some indications based on a technically analysis.

BITCOIN IS TESTING A KEY SUPPORT: REBOUND OR BREAKDOWN? 

If we take a look at the weekly chart above, we can see Bitcoin is testing the long-term up-trend line. This is a critical level, and if prices will breakdown this support then we will see the cryptocurrency drop more in the next days, towards the next two supports: the first at $5500 and the second at $3500.

The long-term up-trend line’s test could be a good opportunity to enter in the market in a long-term prospective, as long as we adjust the stop loss below this important support (if Bitcoin rebound the gain could be significant, otherwise if it drops we will not lose too much).

A possible rebound on Bitcoin is drawn on the daily chart. Credit: tradingview/TBGlobalist

In case of rebound prices will came back in the area $10000-$11000, before going to test the lower trend-line drawn from all time high peak. In this scenario we expect Bitcoin to move sideways, as buyers and sellers will continue to fight each other in that area, until the market will give a new direction.

We remind to our readers that Bitcoin, as well as any other altcoins, is a risky investment and is very volatile, and moreover is in the middle of a huge correction, which maybe is not over yet. Trade with extreme caution.

Bitcoin: complete technical analysis for short and medium term

Bitcoin

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.  

Bitcoin
Bitcoin’s daily chart shows a sideways movement.

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.

No, China is not going to shutdown Bitcoin mining activities

A report published on 4 January on finance.caixin said The People’s Bank of China is planning to shutdown Bitcoin mining activities. The rumor was leaked out to the web by Guo Hong, a celebrity in the cryptocurrency world, who stated with a Wechat screenshot that all mines will close by January 5th. Lately, Guo Hong replied that the screenshot was photo shopped and denied all those claims.

Afterwards, other media reported that The People’s Bank of China held a meeting to demand Bitcoin miners to close all their activities within a limited time period, however officials of the Bank denied the meeting, and told Caixin reporters they just want to phase out preferential policies.

Officials wanted to clarify their stance toward Bitcoin is neutral, and they don’t want to encourage nor hamper mining activities. Bitcoin mining is very prosperous in China and it accounts for nearly 70 percent of the global hash power in bitcoin. The power consumption of mining is very high and it equals on 1 year the power supply to 50 million households, consuming 1.8 tons of carbon dioxide. Pollution in China has become the leading cause of death, and the government is fighting against its environmental issues cementing the global dominance of renewable sector. China has no intention to prohibit mining of cryptocurrency, but in the future is high probable the government will regulate the electricity consumption behind this activity. 

 

Bitcoin’s Friday bloodbath proves cryptocurrency is a risky business

On December 22 Bitcoin, as many other cryptocurrencies, had the most significant drop since 2015: the prices plunged below $11.000 and then they stabilized around $14.000. This kind of correction was inevitable for many analysts, after Bitcoin’s price doubled two times over two months and hit a record high of $19,857 (one year ago Bitcoin’s value was around $1.000).

Moreover, other altcoins had even better performance compared to Bitcoin:  Ethereum is up over 7.000 percent and Litecoin is up 5.400 percent. Those huge performances have attracted mainstream attention and people and financial institutions are jumping in the crypto-market more and more every day. However, Friday bloodbath should be a first warning to all people who are not familiar with cryptocurrencies , or any other investments, and turned to Bitcoin for an easy source of earnings.

Forbes’ Jessie Damiani indicated 6 possible explanations why the Bitcoin prices dropped so low, while some see the drop as fallout from long-unresolved problems with Bitcoin’s infrastructure.

The drop is probably not the Bitcoin’s bubble burst invoked by many analysts over the year, but Bitcoin’s extreme volatility proves this market is risky almost as any penny stocks out there.

 

Ewald Nowotny urged the European Union to regulate Bitcoin

Bitcoin

During the 2017 Bitcoin’s value jumped from $1.000 to over $16.000 and, as the crypto-currency popularity grows, Central Banks starts to worry over the consequences of a bubble burst. In a worst case scenario the blame will be put at the bank’s doorstep since bankers kept the currency unregulated despite the high demand.

Not for nothing Ewald Nowotny, president of the National Bank of Austria and member of the European Central Bank ’s governing council, on Monday urged the European Union to regulate Bitcoin: Simply because of the scale, it is certainly increasingly necessary to discuss whether and in what form regulations are needed here. A particular aspect that needs to be discussed …is the question of how far the regulations on money laundering …are relevant here,” he told a news conference.
“While even small lenders were subject to strict controls on money laundering, it made no sense that even large bitcoin transactions could proceed without similar checks”, he added.

Bitcoin market cap surpasses New Zealand (and many US giants)

Bitcoin

2017 will be reminded as one of the greatest among cryptocurrency enthusiasts, crypto miners and bitcoin owners. The surge of Bitcoin, the most famous cryptocurrency on the planet, has been impressive and consistent for the whole year.

On January 2017 Bitcoin touched $1.000 for the first time and on December it values 10 times as much, surpassing the $10.000 ( bringing its climb this year to more than 1,000 percent). The consensus and the future of the cryptocurrency it’s unclear, with some analysts predicting price to rise over $100.000 (John McAfee’s target price for 2020 is $1 million) while others keeps seeing it as a bubble ready to burst at any time.

Meanwhile, one thing is clear and undeniable: the price keeps rising and along with it its market cap.  With all Bitcoin in circulation, the cryptocurrency has now a market cap of $190 billions, and it continue to rise very fast.

Bitcoin value is currently above economies such as New Zealand (whose economy is valued $185 billion), Romania ($188), Iraq ($175), Algeria ($165). The Bitcoin economy surpasses even giant companies as Pepsi, McDonald’s and Boeing, as reported from Bloomberg. 

At these values, Satoshi Nagamoto’s fortune is worth about $10 billion, turning him one the richest person in the World (he now stay in the top 250th). The pseudonymous creator is estimated to own 980,000 bitcoins, amassed from mining the cryptocurrency in its early days.