The chart above was this week, the price of bitcoin blew up past $420, last week’s price, going up on an impressive run to $450 on Bitstamp. It was reminiscent of the run up to $502 in late 2015. $450 resistance level pushed back on price, and a sell off ensued down to $408. Price is now at $426 as of writing this.
Since January 8 on the chart above, when price failed at breaking $466 resistance level, a a series of cascade sell offs brought price down to $352 low. This support level held over the next weeks that followed, before launching off again on February 9. It has been almost a complete retrace to $450.
From $369 to peak at $450, price has retraced 50% as per fibonacci retracement levels. Bitcoin loves the 50% retrace, if this consolidation holds this level, another leg up to $466 may be due. But, there are bigger forces at play here, like a larger converging triangle active since November 2015, seen here on the 3 day chart below.
Almost all traders are watching how this unfolds, and it will be interesting to see if this pattern becomes a self fulfilling prophecy. Typically, this triangle breaks out upwards, but not always. For this retracement from $450, it should ideally bounce off the rising slope of the triangle, around $400, with an allowance to $385. A failure would be catastrophic and collapse down to $300. A rebound would head to $430, and attempt to break the rising slope.
The next weeks are critically ripe for a huge move in either direction. Speculators forecasts are split on either side, but with a heavy bias on a bullish breakout.
Bearish: “$440-450 is my upper limit. Beyond that and I will be long term bullish on bitcoin… I am still bearish for the majority of 2016”
Bullish: “The market reacted very well to the [The Bitcoin Roundtable Consensus] news, and we are seeing very strong support at this new 440$ level. I firmly believe this news will catapult bitcoin to 750. A correction is underway, i’m thinking we will keep pushing new highs day in day out for weeks if not months.”
Bitcoin Fundamental News
Bitcoin Roundtable Consensus
The debate on how to improve the bitcoin protocol has split the community into factions calling for soft and hard forks alternative paths to raise the block size. Bitcoin Classic, is the latest hard fork proposal out of the starting block. But, Bitcoin Core disagrees on a hard fork now and instead proposed segregated witness, a soft fork that raises capacity and includes much needed changes.
On February 21st, 2016, in Hong Kong’s Cyberport, a meeting of stakeholders – developers, miners and exchanges met and agreed on a roadmap over the next 15 months. It incorporates both factions with a timeline:
- Segregated Witness is expected to be released in April 2016.
- The code for the hard-fork will therefore be available by July 2016.
- If there is strong community support, the hard-fork activation will likely happen around July 2017
The protocol is fundamental to the price of bitcoin.
Japan regulators Propose Treating Bitcoin as Real Money
As the home of Mt. Gox, the largest bitcoin exchange collapse in bitcoin’s history, Japan has had its fair share of incentive to regulate the virtual currency. The Nikkei Asian Review reports financial regulators are considering treating it as a method of payment, essentially making it legally equivalent to conventional currencies.
“The Financial Services Agency’s legislative revisions would recognize bitcoins and other virtual currencies as fulfilling the functions of currency, meaning that they can be used to purchase goods and services. They must also be exchangeable for legal tender through purchases or trades with an unspecified partner. ”
CFTC Discusses Blockchain Future and role of Regulators
Coindesk reported The US Commodity Futures Trading Commission’s (CFTC) Technology Advisory Committee held a hearing on 23 February on blockchain applications for the derivatives markets. The committee was clear about not getting in the way of technological advancement,while also admitting challenges in establishing regulatory regimes for tokenized assets.
“What regimes would cover these tokenized assets? And if they’re in transit from one jurisdiction to another, do these tokenized assets become recognized under law?”
Bitcoin Weekly Price Forecast
This week, my bias is a bullish case outline above, but not without caveats. Some levels will be crucial for this bullish case to materialize.
Going down, $400 will have to hold, and price will have to respect the rising slope. I make an allowance for spook sell offs at key support levels to shake out weak hands, upto $385.
Going up, $450 is a key levels for the bullish case to activate, and $470 and $470 for good measure.
Because the whole market is aware of this triangle, a break out may escalate quickly up as everyone gets on board the bullish train.