The uncertainty this past week concerning cryptocurrency prices has been beyond the call of duty. Seventeen days ago, I posited in my blog entitled, “Bitcoin – Bearish Sentiment Confirmed?” that the Bitcoin price could drop to as low as $3435. As I write, the price is $3300. Mind you, I am not jumping up and down with joy that I got it right.
A friend of mine – a big Elliot Wave advocate - asked me earlier today where I thought the next price point would be. I took a quick look at my charts and then switched over to the Bitcoin weekly chart. In this chart, the 200-weekly moving average is included with the Commodity Channel Index (CCI), and the Relative Strength Index (RSI).
One can immediately see that the current price is close to touching the 200-weekly moving average line. The 200-weekly moving average is at $3121 meaning that Bitcoin may hit that price point next. Please note that the keyword here is “may”. And even if it does, the price may bounce back up to a higher. The reason for that bounce is in the gradual decrease in strength exhibited in the CCI. I am no Elliot wave fan nor do I use the indicator but my friend tells me we are at Wave 3. He tells there will be a bounce to Wave 4 and then another massive drop to Wave 5. I will leave fans of the Elliot Wave to figure that out.
I strongly believe this uncertainty will continue into next year before there is any semblance of calm in the market. And who knows maybe there will be some good news giving the market some serious positive cheer, but then again, your guess is as good as mine.
Yesterday I put out a piece talking about the price of Bitcoin. I mentioned the next possible price drops that may occur. The first was $4571, and the second $3454. It was to my astonishment that the first of the two drops had been attained. I never expected it to be that quick. With the current RSI in oversold levels, contrarians are looking to pick up some BTC at what is considered to be cheap. RSI, as I write, is at 12.26 and the price of BTC has somewhat recovered at $4920 having been as low as $4416. I would ask the adventurous among us to be cautious. RSI might be at an oversold level but the price may recover for a little while before dropping even further.
Any further drop and I suspect that the price level - $3435 – will be next. One quick reminder, the BTC price has been below the 21-day EMA (Exponential Moving Average) for a little while now, which indicates a highly bearish tendency. The lack of certainty in price direction is what makes this market interesting. As always, no one knows what might happen at any particular moment but then again, your guess is as good as mine.
It’s 7 pm CAT (Central African Time) and I am in my office trying to finish off a report for a client when I get a Telegram message from a friend:
“WTF is going on with Bitcoin; why is the price falling?”
The message sort of disturbed my evening of work. I had not looked at the crypto market for a few days as things had remained flat for a while. Now we had this sudden movement with nothing prompting it. I had a quick look at the BTC chart is here is what I saw:
One thing I know about any market is that nothing happens without a reason. Several reasons came to mind without any particular clarity. It was time to seek why this was happening. I first thought that some trader’s bot/s had gone haywire triggering others to do the same. Nevertheless, scanning some of the news sites brought other things to light.
Several governments across the planet have said they will begin to tax holders of Bitcoin, the United States and South Africa come to mind. I was intrigued to read about some crypto hodlers selling out their positions to cover taxes owed. Could this be possible, maybe but not enough to trigger a massive sell off except that seller is a really big whale.
Perhaps the most pertinent reason for the sell off was the upcoming Bitcoin Cash hard fork. A hard fork is essentially the splitting of a cryptocurrency into two or more new currencies. At that time, Bitcoin Cash (BCC) was to be split into Bitcoin ABC (core Bitcoin Cash), and Bitcoin SV (Satoshi’s Vision). Bitcoin Cash had been volatile as a currency precisely because of the potential hard fork, which in turn may have affected the crypto market as a whole. We must not forget the civil war going on in the BCC community. This surely had some impact on the sudden drop in the crypto market.
Some of us may argue that the weakness in the US stock markets might have had some impact no matter how small. Maybe investors were just spooked and decided to sell. This argument can be countered.
I think we can safely ignore the pundits going on about BTC $50k, and question where BTC price will go. For starters, BTC broke a key market structure. This was breaking the $6000 mark. As of this blog, the price is at $5251.7 having fallen even lower earlier today. Relative Strength Index (RSI) is also at an oversold level. Oversold levels may mean a bounce back to previous resistance but no one can really tell whether that will happen. If no bounce then it may mean that things are now officially bearish. Another key thing is on the BTC weekly chart. You may notice that the BTC price has broken the 21-day EMA. This may be a signal to indicate a true bearish sentiment.
In a bearish environment what price levels are we talking about? We can give ourselves a rough deduction by using the symmetrical projections methodology. Also known as symmetry or equal drive, this is done by taking an equal measure of previous price highs and projecting them to the lower levels (apologies for not explaining the methodology properly, this will require a separate blog). This gives some idea as to what price may be in the future.
The price estimates we arrived at were $4571 and $3435. Will Bitcoin fall to these levels, maybe. We have all witnessed the volatile nature of Bitcoin with no one really knowing what to expect in the months and years to come, but then again, your guess is as good as mine.
Optimism seems to have returned to the land of crypto. Pundits and the like are back to calling bitcoin $20k once more. Some have even gone as high as $50k by October. One often wonders what these guys are smoking. Maybe I should have some too if only to have a peek into their perspective. As always, I look at what the charts are saying, and I don’t see bitcoin $20k just yet. Please note that I have not said it won’t go back to that range but not right now.
Looking at my charts indicate show a steady rise in the price of bitcoin. For those who are Fibonacci purists, bitcoin’s price has already gone through the 0.5 and has got close to the 0.382 level- $7110.6 and $7432 respectively. The RSI (Relative Strength Index) is on the rise but not at an oversold level just yet. The CCI (Commodity Chanel Index) also indicates that there is some momentum in the price rise. News from China on the cryptocurrency speculation clampdown as well as tighter regulations in South Korea has not dampened enthusiasm. Maybe this really is the expected rally. The omens are indeed looking good. We all know the crypto market is very fickle, and things do change suddenly but then again, your guess is as good as mine.
Before continuing, I just want to state that what you are about to read is what I wrote on Saturday. The only thing I have changed is the diagram, which captures the price of Bitcoin a few minutes ago. I see no reason to change my view.
Investors and traders have not seen a time more confusing and volatile than in the last two weeks. I have often joked that all it takes to move cryptocurrencies is for Vitalik Buterin to say he has changed his coffee brand and prices will fall. We all know that the ETF rejection has caused the latest price movements. Having said that, where is the Bitcoin price going? In my blog piece, “Bitcoin – Bearish Sentiment, Bullish Feelings”, I said we need to watch the clouds to see, which direction the price of Bitcoin takes; it has finally taken a trend direction – a bearish one.
There are two key variables to saying this. First, the candles have come out of the cloud at the bottom. This means that the trend is in a downward direction. Second, the tenkan-sen (the blue line) has crossed the kijun-sen (black line) in the downward direction. A third point can be made by looking at the cloud itself. Notice that the red line also called Senkou span B is above the green line – Senkou span A – then the trend is bearish. Ichimoku purists may insist that both the kijun and tenkan-sen must also be under the cloud to confirm the bearish trend. Nevertheless, the more aggressive traders may believe it is worth taking the risk despite not all variables aligning.
We must also remember that this is the weekend and as such many institutions as well as individuals are bound to use trading bots. Just as I concluded in another of my previous blogs, a combination of trading bots and animal spirits bring about the level of uncertainty and volatility we are witnessing. Expert or not, we do not really what the bitcoin price will do any minute now. But just in case you are wondering, your guess is as good as mine.
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