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What if Bitcoin falls?

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It’s called digital gold for a reason. There are many parallels that we can draw between the physical asset that is the original form of money and this new digital asset that is the future of money.

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I remember a time back in 2009 when gold crossed $1000 an ounce for the first time. Investors were feeling generally uncertain about the future of Europe and inflation in the USA and were fast reverting to gold as a source of stability. Analysts were calling for $2000 an ounce, some were as aggressive as $5000.

(This chart shows the price from 1960 until today)

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It never did get to $2000 though. The highest price came in at $1920 an ounce in 2011. At that time leverage requirements changed in the USA and eventually, sentiment shifted.

“In the long term, the price of gold will always rise.”

My grandfather taught me that and I still believe it’s true. If you’re a short term, high risk trader in a six year bear market that sentence bears little relevance.

The purpose of this writing is not to scare you. Rather, we need to note that cryptocurrencies are the most fast paced market since the beginning of time. I do believe that we’re moving to a digital economy very rapidly and that the value of the blockchain will need to rise sharply in order to support that, but as prices can fluctuate extremely rapidly, we should at least explore the possibility of where it might go if a major pullback does come.

Always think about the other side of the coin. 😉

Volumes

Japan has already legalized it. A major infrastructure change is coming very soon in the world’s third largest economy. We know that Bitflyer has signed a contract that ensures bitcoin is accepted at hundreds of thousands of retail stores across the island nation and that about 20 new bitcoin exchanges will be coming online shortly.

India is currently reviewing the option to legalize and regulate digital currency. After the harsh and rapid demonetization, they’re in sore need of an alternative to paper money. They have a panel working on it now and hopefully, we’ll get some good news in the coming weeks.

On or before Monday, May 15th, the SEC will deliver a decision to either approve or deny the world’s first bitcoin ETF, which if approved will open the markets to Billions of Dollars in institutional investments.

As I’m writing, the total market cap of bitcoin has just breached $30 Billion for the first time ever. A notable milestone but still not nearly enough to support the global economy, which now stands above $1 quadrillion.

However, according to coinmarketcap.com, the current volumes are coming from Poloniex, Kraken, and Bithumb (Korean exchange). Bitflyer is less than 3%. This tells me that most of the money flooding in at the moment is in fact, speculation money.

Technical Analysis

In January, I made a video called Bitcoin Rush, that descibed the simple technical analysis pattern that the price has been following.

You can see the video here:

Since that video, the pattern has held outstandingly well. Of course, past performance is not an indication of future price movement but if the pattern continues this is what we can expect.

This graph shows the price of bitcoin over the past year and a half.

The red, white, and yellow lines are covered in the video. To recap, every time the price breaks a line, it continues to surge until it finds an arbitrary price to turn around, then comes back to touch, or even dip below the previous line.

Since the video was made, the price went all the way up to $1336 (blue line) then indeed retraced back to the yellow line just below $775.

Let’s ignore for now the green circle, which is the excitement around the first SEC ETF decision. We can see the massive spikes on March 10th when the ETF was declined but the long term price moves were not affected.

Now, let’s hope that the price continues to rise, the tipping point comes, and we never see it at $1800 a coin again. But…. if we do see a retracement, there is no support on the chart until $1136, or possibly $1292 (the highest price inside the green circle). Either way, the next support is more than $500 away.

This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. 

Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Daily Analysis: Dollar Rebounds as Stocks Struggle at Key Levels

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2731 -0.08 %
DAX 12,451 0.86%
WTI Crude Oil 61.64 0.31%
GOLD 1351.00 -0.32%
Bitcoin 10030 -0.52%
EUR/USD 1.2405 -0.78%

The main US stock indices entered a crucial zone during the overnight session that we have been monitoring throughout the last two weeks, as the line-in-the-sand zone for the correction. Despite that, the question regarding the fate of the move has been postponed for next week, as the S&P 500 and the Dow failed to clearly rally above the zone, while the Nasdaq showed relative weakness after leading the market higher during the bounce.

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S&P 500, 4-Hour Chart Analysis

We are still leaning on the side of the bears regarding the short-term outcome, as the technical damage of the Volatility-Armageddon seems bigger than what a straight-line recovery would suggest. That said, the fundamental news was great today (not counting the latest developments in the Russia-Gate), as the US housing market sent positive signals amid the rising yields, while the UOM Consumer Sentiment Index also beat expectations.

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On an interesting note, the rise in yields paused, despite the positive economic news, and in this perverse world that led to a strong rebound in the Dollar, right after the new multi-year highs in the EUR/USD pair during the overnight session.

EUR/USD, 4-Hour Chart Analysis

The Euros weakness helped equities of the old continent is finally showing some relative strength, and the same goes for Japan, as the oversold readings in the USD/JPY pair that we noted also led to a rebound, back above the 106 level. While the bounce slightly helped the negatively diverging benchmarks, the clear technical weakness remains another bearish sign for the coming weeks.

DAX, 4-Hour Chart Analysis

The Dollar’s bounce pushed the price of gold lower too after the encouraging rally, but the Shiny Metal remains just a tad below its rally high, which is commendable, given the improving risk-sentiment throughout the week, even as another short-term correction is possible here. Crude oil enjoyed another positive day, although it remains well below its recent highs, just as the commodity-related risk-on currencies, where we already noted the relative weakness yesterday. That also adds to the cautious outlook for equities even in the face of the 5/5 positive days this week.

Gold, 4-Hour Chart Analysis

Cryptocurrencies

The crypto market continued to show robustness amid the hectic trends in traditional assets, and today’s meager correction adds to the bullish signs that emerged last week and remained with investors throughout this week. While not everything is rosy, with still several coins in dominant downtrends, including Bitcoin and Ethereum, there is clear leadership behind the rally, and if the coming short-term pullbacks remain in-line with today’s move, bulls should have their hopes up

BTC/USD, 4-Hour Chart Analysis

What would change the bullish posture is a return to the “everything moves together with high volatility and bearish volume” regime of the preceding steep sell-off, but, for now, that seems unlikely, and a quiet consolidation this weekend would be just what the doctor ordered for the segment.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Technical Analysis: Cryptocurrencies Show Strength amid Slight Correction

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The crypto segment is trading in a short-term correction, or rather consolidation pattern today, as bullish signs continue to dominate the landscape, despite the pause in the surge. The largest coins are mostly down by a few percent from the overnight highs, but the momentum of the move is not substantial, for now, and several currencies are showing relative strength.

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Bitcoin is hovering around the key $10,000 level after hitting an overnight high above $10,300, with the short-term MACD indicator showing the possibility of a short-term correction. With that in mind, investors and traders should wait for a dip before entering new positions, even as further gains are possible. The next key resistance level is at $11,300 with further strong levels ahead at $13,000, and $14,250, while the line-in-the-sand support is still found between $9000 and $9200.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin Cash, Litecoin, NEO, and Ethereum Classic are all among the stronger coins, while Ethereum is also holding up well amid the weak pullback in BTC. The price of the ETH token has been very stable today after a period of underperformance, and it is still trading well below the next resistance level at $1000, but also significantly above the key support near $850.

We still expect the currency to consolidate more before a clear move out of the downtrend, but investors could still use the dips to boost their holdings. Further support levels are found at $740, $625, and $575, with resistance above $1000 ahead at $1175.

ETH/USD, 4-Hour Chart Analysis

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Pre-Market: US Stocks at Make-or-Break Levels as Euro Tests 40-Month Highs

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Traders might be in for another exciting Friday session in the US, as although the coming Chinese year of the dog means that liquidity might be lower than usual, the aftermath of last week’s crash is in a crucial phase. The surge in cryptocurrencies also halted a bit, and all major asset classes look ripe for an action-packed day, including bonds, commodities, and fiat currencies.

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The key levels in the major US indices that we have been monitoring ever since the crash are now in play, with the Nasdaq actually being already above the corresponding resistance zone. That said, apart from the tech benchmark, the Dow and the S&P 500 are hovering right near the “hot” zone, and before a clear move above it, bears could still have their moment, with a possible re-test or even new correction lows in the coming weeks.

S&P 500 Futures, 4-Hour Chart Analysis

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As we noted previously, it’s unlikely that the bull market is dead just yet, despite the fact that we agree with Peter Toogood (really) that “this market is nuts…” from a valuation perspective, but short-term, these are the levels where the bounce should fail, in theory, that is.

At this point, even bulls should take a step back, and wait for the next pullback before jumping in, as the short-term indicators are stretched, while bearish traders could be looking for entry points today, and long-term investors could just enjoy the show.

Heavy Trading in Forex Markets

Although equities and Treasuries are mostly in the headlines, the most important forex pairs are also very active, with the Euro, the Dollar, and the Yen all being pushed around by the quick repositioning of the big players.

EUR/USD, 4-Hour Chart Analysis

This creates a great day-trading environment, with clear, significant swings in both directions, within the strong trends. The Dollar is generally trading lower since the bounce started, and the EUR/USD pair already managed to reach a new 40-month high during the Asian session, before turning lower in European trading.

USD/JPY, 4-Hour Chart Analysis

The USD/JPY pair traded with a 105 handle today, again a more than 1-year low, and the trend looks clear, even as the short-term picture is oversold. Gold might also be preparing for a new multi-year high, so everything looks set for more fireworks in currencies too. Stay tuned.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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