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The Price of Bitcoin is Recovering

This week, Bitcoin continued its recovery from the $758 low of January 12, 2017 to a high of $940 on January 22. Since two consecutive sharp sell offs from $1139 all time high at the beginning of 2017, the digital currency’s price is gradually reclaiming its lost levels. While part of this resurgence is down to classic technical analysis, recent comments from China and development in the United States have fueled the recent trend up: an expected Bitcoin IPO on the NYSE in October 2017 and unofficial approval of Bitcoin trading activities by the Chinese Central Bank. Bitcoin is going back to $1000!

deep 11.png

deep 11.png

2 sharp sells off from $1139 on January 2nd broke past both $850 and $780 support levels dating back to 2015. Price managed to recovery from a $750 spike and much of this week was about gradually gaining ground on $780, $850 and $900. As at writing this analysis, price is trading at $919, in a $25 range between $900 and $925. After flirting with $937, price sold off to retest $900; it seems price might linger at this level for another before another break.

Deep 33.jpg

Deep 33.jpg

Having tracked Bitcoin charts for 3 years now, I have observed numerous classic chart patterns play out. The current sideways trading range is oscillating around a neckline, that might play out as an inverted head and shoulders pattern. It is possible the right shoulder shoulder may not yet have fully formed, so a second sell off to $870-$900 could materialize to complete a deep V shoulder. CarpeNoctom says a break out with volume should confirm this break out soon.

deep 44.png

deep 44.png

Seen here are the 30, 50, 100 and 200 day EMAs on the 6 hourly chart. The test of the long term EMAs shows an attemot to change the trend. This one failed to break past both the 100 and 200 EMA, bouncing off as support. deep 55.png

deep 55.png

This chart above shows 30, 50, 100 and 200 day simple moving averages on the 6 hour chart. The past 40 hours of volumes traded just slightly above 100 day moving average. There is room between 100 MA (2) and 200 MA (1), and I would not be surprised to see a drop to retest the 200 MA at $870 – $900. This would be the second right shoulder to complete an inverted head and shoulders pattern.

The shape of these moving averages suggest a change of trend to come; the first dip is a test of whether the trend is strong enough to continue. I am cautious of another leg up, and will be looking for a top to cap off the past 15 months of a bull trend. I expect a change of trend to ‘bearish’ after the market finds a top. For now, it is wise not to get caught up in euphoria as we head up to retest $1100.

BITCOIN FUNDAMENTALS

Bitcoin Investment Trust Files for IPO

Grayscale BIT, a publicly listed bitcoin open ended trust fund listed on OTCQX, has made an application to the Securities Exchange Commission for an IPO planned to launch in October 2016. BITs registration papers, filed on January 21, revealed its intention to list on NYSE Arca, as reported on Bitcoin.com. The IPO “is designed to provide investors with a cost-effective and convenient way to invest in Bitcoin.” according to Grayscale Investments, LLC, the sponsor of BIT.

The race to launch mainstream Bitcoin backed financial products is heating up. Besides BIT, Solid X and the Winklevoss Coin ETF are yet to be approved by the SEC. The regulator has a reputation of delaying decisions on the controversial digital currency. One is bound to be approved at some point.

An approval of any of these products would result in a higher Bitcoin valuation for sure.

Chinese Exchanges set to begin charging trading fees

After Bitcoin’s exponential price rise past the 2013 all time high in January 2017 (in CNY prices), the People’s Bank of China met with exchange operators. Concern raised by officials included high margin trading.

This week On January 21, OkCoin, Huobi and BTCC announced they will introduce a 0.2% charge as from January 24 as via official statements.

Chinese exchanges have long been criticized for “fake wash volumes” due to their zero trading fees policy. Some credible Bitcoin price indices even go as far as excluding Chinese data over lack of transparency between real and fake data.

BTCC China said about the change in policy

“We are implementing fee-based trading to curb market manipulation and extreme volatility. Market makers and takers will both be charged a flat fee of 0.2 percent per transaction.”

BITCOIN WEEKLY PRICE FORECAST

This week I am neutral. It is hard to pinpoint where price will head in the short term. it is a coin toss between testing a low $870 for a second right shoulder of an inverted head and shoulder pattern or a bounce off the $900 neckline of the head and shoulder pattern that then materializes into the medium term rise to retest $1000.

In the medium term I am bullish. I expect a gradual rise up to retest $1000 levels.

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