Posted by: pesa_mic
April 7, 2015
Will this market crash today or tomorrow?
This past week, bitcoin’s price action did not exhibit much change from last week’s price analysis. Besides an attempt to break out from a range on 6H charts, prices moved mostly sideways. $262 has been the highest price in what seems like channel breakout. However, prices are still held within a range with $240s acting as lower support and upper resistance at $255.
Looking at Exponential moving averages, the 50 day EMA is below 100 day EMA and now attempting a bullish cross.
It hardly looks convincing as price action has been below 100 day EMA since prices fell from $281 impulsively, marking a trend change. Both EMAs have formed a strong resistance zone that the market has failed to pierce through. For a convincing move up, it should break above both trend lines and hold well above. The 50 day would also have to cut above 100 day and hold as well.
The probability of a trend reversal are minimal, when volume behaviour for the past 2 weeks’ price action is considered. A clear decline in volume from $166 bottom paints a bearish picture. Although prices have been moving up, volumes have taken their own direction. This is significant because
“Volume should move with the trend. If prices are moving in an upward trend, volume should increase (and vice versa). If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend.” – Investopedia
Bitcoin Fundamental News
Buttercoin shuts down
TechCrunch reported an impromptu statement on Buttercoin’s (a US exchange) website to clients.
“We regret to inform you Buttercoin will be turning off our service on April 10th at 11PM Pacific time .”
With Google ventures & YC combinator as investors, it received $ 1.3million in seed in 2013 to launch an open source exchange,however. Over time their strategy took different forms. The company cited ‘lack of Silicon Valley interest’ for opting to wind down its operations. The note went on to reassure customers
“We remain 10% secure & solvent with all customers deposits with all customer funds accounted for”
Bitcoin foundation bankruptcy fears, Core dev funding at risk
Details of the foundations financial troubles came out via a rant by a board member who chose to remain anonymous. According to a note to the press, core dev funding is at risk, while 99% of staff are set to be laid off.
“the Bitcoin Foundation is effectively bankrupt. As a result of 2 years of ridiculous spending and poorly thought out decisions, they almost ran out of money in November of last year.”
The foundation has struggled to gain reputation, after a controversial election, centralization fears and now this. Interesting comments on possibly crowdfunding Bitcoin Core development are available on reddit thread here
Mainstream finance wants Bitcoin
According to Casey and Hope on the WSJ, giant billion dollar firms see huge profits in bitcoin markets. While some are cautiously eyeing entry, others such as DRW Holdings LLC have already bought into. Citadel securities and KCG Holdings Inc. were also mentioned, confirming what speculators are expecting. Interestingly, they identified low market cap, regulation and professional platforms as barriers.
To support enough liquidity for mainstream players however, higher valuations are inevitable. It is expected prop trading firms and investors getting involved will stabilize prices
Bitcoin price forecast this week
I still maintain my bearish case from last week as highly probable. Unless significant market news is confirmed, I expect lower prices ($220) in the coming week. This current prolonged sideways movement is a pause on an inevitable impulsive break down.
Markets are seemingly on a knife edge as prices are close to a decision point. Market data from this week point to a rise in short positions ($ 6.9 million) by 4 – 5k, while long swaps (at $ 25 million) have not flinched in 5 days. Still, the price has risen. Short positions are now higher than ever, and have been on an uptrend since August 2014, the last high.
Charting longs (in red) vs short (blue) position from this week visualizes this trend
Elliott wave counts from $303 top also suggest it is only a matter of time before longs crash when price takes a dip. The drop from $303 to the most recent low $235 is considered as a Wave 1, as per current counts. Wave 2 is the trend up from bottom $235 that we are now in. Wave 2s are corrective waves from the main trend. Essentially, Wave 2 will be accompanied by a Wave 3 motive and resume the bear trend.
This correction is complex and identifying its top is key. Once a high fails to materialize, then prices can only go down. The highest point of this trend will be C, thereafter I expect a sharp drop – Wave 3. So how do you know what high points to watch for possible reversals?
Resistance levels going up are critical areas to observe. Around $255 is a resistance level, the next one at $270 and another at $280. Wave 2s typically do not retrace 100% of wave 1. Therefore, as long as we are still below $280, then a move down is not invalidated. Watch out for this levels on any uptrends for potential reversals.