Bitcoin Price Analysis – April 7th. 2016

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This week, the price of bitcoin retraced down to a low $407, after failing to break out from under the $422 resistance line. $427, was a spike high that pierced up above $420 level, but, was quickly followed by a sell off. What followed was a retest of low $400s bottom thrice, at $407, $408 and $409 – a triple bottom.

This bottom has held strong this week, forming consecutive higher and higher lows, as price edges closer to another attempt at breaking $420. Price has been tightly squeezed in the last 2 days, right below $420 level, and forced to trade within a narrow $2 sideways range between $420 and $422.

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This 1 day chart above, from Bitstamp, highlights the significance of $420 (1), where, as of writing this, price is chipping away at it from the bottom. After breaking below it in January, price went back above it at (2), till $446, but sold off to low $382. The month of March was about regaining lost ground. There is no going up without breaking $420. (4) at $440 is the next target. A successful break will encounter resistance here, perhaps get shot back down to $420 as in late February (2).

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This symmetrical triangle pattern – a pennant, active since November 2015, is yet to pop. Most market traders have their eyes on it, with majority expecting a break to the upside. At (1), it is a narrow squeeze.

Fractal Forecast: Bitcoin Markets in East West Diverge, takes an analytical look at this pattern on both Western and Eastern exchanges, pointing out some divergences.

“The East shows a weaker picture, as if the pennant might break to the downside.The West is in a stronger range, above the magenta median line.”

In summary however, this analyst is bullish, saying

“I am patiently bullish. Bitcoin has shown its strength to me by overcoming the range we were stuck in for most of 2015. Many are worried that the upcoming halving of the Bitcoin mining reward is already priced into the market. Maybe it is, maybe it isn’t. Either way, supply is going down this summer, and no one wants to be watching from the sidelines.”

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A low probability break of this pennant to the downside, would lead to a second alternative larger flag formation seen above. Some analysts see weakness at $440, and expect a sell off when this level fails.

Barclays Partners with Bitcoin payment Start Up Circle

The Financial Times reported a breakthrough partnership between Goldman Sachs backed payment app Circle and Barclays. Officially, it is the first time a European bank is granting access to its infrastructure to a digital currency company.

“The tie-up with Barclays means Circle will be able to move sterling across the blockchain — a public ledger where bitcoin transactions are verified and recorded.”

This is great news for bitcoin and the open source blockchain, after talk on private blockchains has intensified.

Jeremy Allaire, CEO and founder of Circle said

“financial services industry did not fully realise the potential of the open-source blockchain, concentrating instead on developing its own closed versions based on similar technology.”

OpenBazaar, Decentralized Bitcoin Marketplace goes live

One of Bitcoin’s value proposition, is its peer to peer nature, that takes out the need for intermediaries. OpenBazaar, is a marketplace built with the same vision, a market where buyers and sellers can trade without 3rd parties. Bitcoin Magazine reported the successful launch of this ‘decentralized Silk Road’.

Some of the earliest sellers have listed marijuana, hardware wallets and bitcoin merchandize. CEO Hoffman said of this first release

“This version is complete from end to end to allow purchase of physical, digital goods and services either directly or moderated. It also allows you to rate your purchases and garner reputation on a basic level. It has an encrypted chat capability that we think will help users communicate more efficiently during trade as well.”

Bank of Canada Working paper Explores Bitcoin Gold-like Standard

A paper published by the Bank of Canada, authored by Warren E. Webber, attempts to imagine the effects of a monetary standard based on Bitcoin. Webber speculates that mixed results would occur from such a standard, and Central Banks would never let it happen as it undercuts their seigniorage authority and control over interest rates for national economies..

On the flipside, Weber also highlighted two potential benefits, as quoted on Coindesk

“there would be greater price-level predictability due to the known, deterministic rate at which new bitcoins are created” and “the resources currently devoted to hedging against fluctuations in exchange rates would be freed up to be used in more productive ways.”

Bitcoin Weekly Price Forecast

This week I am bullish up to $440. I expect price to pop above $420 and move beyond last week’s $427 high. At $440, price will encounter a resistance level, and might retrace, depending on market intent  to go on a bull run.

Beyond this week, I am cautious, but bullish. There has been plenty of good news coming out this week, and despite the block size debate, Bitcoin is at a better place now versus last year at this time. Perhaps it is good enough for another leg up to $650.

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This chart from Koryu, forecasts the first leg up to $480 – $500, going on to say

another try to break out, looks pretty good this time”

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