Posted by: pesa_mic
June 18, 2015
This week, the price of bitcoin spiked to a high of $259, an 8% rise in a span of 48 hours. Typically, market participants and mainstream media hopped on board, looking to find reasons to justify this run up; on the back of dull trend that has characterized the past 3 months. A double bottom, a common technical reversal pattern, observable on the 4-hourly chart, formed a firm base for another attempt at higher prices. This time, momentum was enough to push through 50% fibonacci level, at $ 240; a level we have observed in past analysis as strong resistance to break since April. Currently, price has stalled at $ 260, coinciding with 38.2% fibonacci level.
Looking at EMAs, on the 12 hour time frame, price has broken through all of them – 30, 50, 100 and 200 day. On higher timeframes however, it is far from it. On 1 day chart, price sits just above the 100 average line, while on 3 day charts, it has pierced above the 30 day but, is slightly below the 50 day. What’s more, on the weekly, price is way below all EMAs. While the short term looks impressive, the long term price action needs to do more to convincingly mark a trend reversal.
For perspective, on 1 day timeframe, the 200 day Simple moving average (SMA) was tested for the first time August 2014, when since prices broke down below it. It sits squarely at $259, coinciding with where price move up has currently halted. Also lining up with 38.2% fibonacci level.
In last week’s bitcoin price analysis, I highlighted a move up to $250 and possibly $270, as a remote possibility to watch on this retracement from the lows – $210, $213, $219. While the speed and momentum of this move was a surprise, it was a real possibility. Here’s how.
So far, since the last top at $303, price went down gradually, in a series of impulses and consolidations. In fact, using EW wave counts, it was a 5 wave move down to the bottom – $210 and subsequently $213. As per this Elliott Wave analysis, the dull sideways move since then, including this run up, is part of a correction, known to take different forms. This particular one was flat for a while and is complex. It is expected to go up till the grey area, labelled (2). Thus, the larger move from $ 303 to $20 is likely a motive wave (1) followed by the current unfolding correction wave (2).
A different observation is on a larger picture view, where a long term bear trend channel extends from $1163 top in December 2014, down till $ 280 on the upper, and from $410 to $ 166 on the lower. This channel has been respected for 18 months now, and is yet to be broken on either the upper or lower limits.
Price action has been struggling to hold within the larger channel, and intersection with micro channels within the larger time frame. For example, looking at the picture closely, price is trending up the purple support line. Observing critical points on moves up is important – at the points of intersection of upper and lower channel supports and resistance. Zooming in closely elaborates this more clearly
The first was at $250 (marked in red arrow), roughly where the run up yesterday eased and the second at around $270 zone (marked in a blue arrow). In addition, I would throw in $283 as another level to watch – where the long term upper channel resistance line cuts.
BITCOIN FUNDAMENTAL NEWS
Side Note: Irrational Exuberance
This week, Greece’s widely published inability to meet its credit obligations was cited as a catalyst for XBT’s price spike. Reuters for example, ran with the title “Bitcoin surges as Grexit worries mount, posts best run in 18 months”
Hindsight bias is a human trait that seeks to find meaning in price movements; this headline has all the classic tell tales. In my opinion, Greece and the price run up are two separate events that just happened to coincide. Shrewd traders, with access to significant resources, can incite market moves in their favor, to capitalize on such news. Looking at all the headlines, it seems to have worked. Even more interesting was the opinion of several reddit users from Greece; according to them, bitcoin adoption trends in their country are closer to zero.
Winklevoss Twins on Gemini exchange
As reported on General Assembly, Cameron and Tyler Winklevoss held a live stream talk on the future of bitcoin and their anticipated Gemini exchange and COIN ETF. On responding to questions from the audience, both reiterated their launch was still on course, saying “We feel like it’s weeks. We do feel like we’re on the two-yard line.”
Goldman Sachs Bitcoin Blockchain Talk
Goldman Sachs officially posted a video from a recording in December. In it, featured a panel comprising of Balaji Srinivasan, general partner at Andreessen Horowitz and Jerry Brito, executive director at Coin Center. The discussion was primarily on Bitcoin’s blockchain and its implications on the future of money, held in front of an audience of mainstream finance professionals. Balaji highlighted the duality of the blockchain and the bitcoin token role as an incentive for the network; a fact often left out.
WEEKLY PRICE FORECAST
This week, in light of recent price movement, I am expecting some consolidation around this zone $245 – $255 for a while, before a further move up towards the points I have highlighted. I maintain the final bottom is not yet in, and see this as part of a correction – Wave (2) of (1). One Elliott Wave rule that applies is Wave 2 cannot retrace more than 100% of Wave 1. Therefore, to invalidate this as a correction, and make it a serious candidate for a major bull run ie reversal from 18 month bear trend, it would have to break past $300 and hold sustainably above this level.