Bitcoin started off August with a selling spree and while the price did stabilize for a week, we are now seeing even more intense selling taking place in the second half of August, 2015. As of right now all indication of a bullish market is now lost and the bears have won the battle.
Bitcoin value is decreasing
When you look at the daily charts you can see that the Bitcoin keeps testing for lower and lower points. The last mass selling on the 19th of August closed the market at $218,693 and even though the next day was bullish, there was not enough buying power to recover from such a deep drop.
We even touched the $211,050 area for a brief moment which likely indicates that another similar drop can happen in the coming days.
MACD and RSI oversold
The MACD and RSI indicators are both showing pretty extreme oversold conditions, but despite that Bitcoin is still falling further. This has lead me to believe that the suspicious drop to $194,922 was indeed some form of a price manipulation and the overall market has just started to react accordingly. It’s sad, but who can really blame the people when the Bitcoin price is so easily manipulated? All it takes is an entity with a big enough Bitcoin wallet.
Who owns the most Bitcoins? The FBI of course. We don’t want to say it, but we’re all thinking it… oh and just FYI, I am not blaming the feds for this one, it’s more likely the BTC-E who is responsible for the last insanely fast price drop. It didn’t happen on any of the other exchanger charts.
Elliott 5th wave
This screenshot shows a trend line that I drew from the lowest point moving upwards. So far so good! The last two bullish candles indicate the 5th wave in the Elliott Wave sequence and according to that logic we can expect the price to move higher than the highest bullish candle that you can also see on the screenshot. This could mean that in the near future we might reach the $450+ area. Other aspects of my technical analysis are also showing a green light. Let’s take a look!
MACD seems to be crossing
While it’s a little bit too early to say for sure whether MACD will cross in a few days or not, the chances of that happening are quite high. We are seeing it making lower lows and the lines are getting closer and closer together. Should they cross it would mean a confirmation in the overall up trend for Bitcoin!
What RSI is telling us?
I am a little bit disappointed that the RSI didn’t move lower. It would have meant a much more intense rally in the future. It seems that we are currently drifting in a neutral area where, once again, upward movement is far more likely to happen.
Is it over already?
The last week’s rally was simply awesome. Congrats to anyone who got a chance to ride the wave along with us. The price started to gain momentum from $320 days before the actual jump took place, but the signs of it happening were all over the place. In just a few days we went from $320 to almost $460 so a correction was bound to happen. In my previous Bitcoin price prediction article I estimated the price to linger in the $410 – $420 area for a few days and then proceed to gain strength once more. Everything was fine for a few days, but looking at the charts today I can say that the correction isn’t really a correction any more, it’s a bearish ride.
FBI – The real market mover
It’s not a coincidence that the price started to fall just when the feds announced that they will be auctioning 50,000 Bitcoins they took from Dread Pirate Roberts, the founder of the biggest black market in the internet history. When you look at the chart you will see that on Monday the market was unsure where to go. I am confident that if it the feds wouldn’t have announced the auction the price would have behaved exactly the way I predicted it previously.
When you look at the way MACD is crossing you’ll see that the previous cross took place at a much lower point. This gives us a little bit of hope that the overall Bitcoin price trend is still bullish. The $320 area is still our strongest support at this point because we have tested it two times already in the past.
What about RSI?
Looking at the RSI it’s pretty clear we are going to go lower from here. Further price movement is now depending on two factors: 1) how many Bitcoins the feds are able to auction and 2) will we reach the oversold market condition before our $320 support or not.
First of all check out how well the support level (black horizontal line on the chart) has been holding. The price bounced right back up after hitting it the second time with a significantly lower selling strength. This means that the buyers are slowly gaining strength and it’s well known that all the prices anywhere tend to go up much slower than when they fell. That’s why the bulls are always more patient traders and bears try to bite it quickly.
Let’s check out MACD
When we add the MACD (moving average convergence/divergence) indicator to our charts we can see further confirmation that’s the price is likely going to move higher from this point. The previous downward opening was only brief, and we have broken through the barrier, so to speak, and a zero crossover has taken place.
And now the fundamentals
Maybe you have already heard about the recent fire that took down a major Bitcoin mining operation. tldr; version: huge fire broke out, took down a massive Bitcoin mining operation in Thailand, millions of dollars in hardware got destroyed with no insurance whatsoever. You can read more about it on this page.
What does it mean for us? It’s another indicator that the Bitcoin prices may skyrocket due to the fact that the mining operation was significant enough to create a disturbance in the Block Chain. Basically Bitcoins just got much more scarce because new ones are going to be mined at a slower rate at least for a little while. You have to wonder whether or not the fire was an accident or a planned event… they have officially denied that their electrical wiring caused that fire.
So long story short: Buy Bitcoins.
Bitcoin price trend
When you look at the overall chart you can clearly see that the price of Bitcoin has gradually declined since June 2013. However, the lowest point of around $280 was reached in October and it hasn’t been touched any more. It seems to me that there is a great potential for trend reversal especially because the last three days have closed higher than the previous.
We have to wait a little longer to confirm this, but things are looking rather good in my opinion. Remember 10 days ago where I didn’t recommend opening a position at all, but if you really had to, I suggested to go long? (Read more about it here: http://ynef.net/bitcoin-price-acting-as-expected-is-it-time-to-open-a-long-position/). It’s never a good idea to trade against the trend, but going long should make sense right now.
Right now the $360 area seems like a solid resistance level. If we break this level there is great potential for further upward movement. In long term it’s already a good idea to buy a few Bitcoins and just sit on them for a while. They’re bound to go higher eventually.
When you look at the MACD indicator you can see that when the lowest point was hit in the first half of October the two lines crossed higher than previous in the second half of the same month. There’s a big chance for the crossing to take place again any time now which should drive the price even higher. Also notice how MACD keeps making higher lows!
The bulls have returned
Just three days after I published my bold Bitcoin price prediction the price has behaved exactly as predicted.
After gently touching the $280 area the price held steady on $350+ for a few days and later climbed to $400. In my previous article I mentioned how media can influence buyers and sellers:
” I wouldn’t be surprised when in about a month Bitcoin will receive more media coverage and everyone would be saying that it’s the perfect time to buy more coins due to the relatively cheap price compared to what it was 6 months ago. “
I guess my timing was way off! I predicted this to happen in about a month, when in fact the important news coverage happened just 3 days later. Read the article that says to buy more Bitcoins here. Let me quote:
“Now is the time to take two hands and buy buy buy. I expect a sharp rally to $330-$350. The price will consolidate around those levels and build a base for a move higher into the year end.”
Almost exactly the same as I predicted in my previous article. It seems that the psychological support level of $300-ish held nicely and with a little help from the big boys (media) Bitcoin prices are on the rise once again.
My own technical analysis
My personal setup however is still showing clear signs of a downward trend. The MACD (Moving Average Convergence-Divergence) indicator has opened downward, is expanding and making lower lows.
The RSI (Relative Strength Index) is not showing any signs of Bitcoin being oversold which would mean more buyers on the market although I’m sure it will get there eventually.
Basically the fundamentals (news) are saying it’s time to buy Bitcoin because the price will rise in the coming months, but my charts are showing no signs of the power of selling to disappear any time soon. Why is that? Could it be that my technical analysis is simply wrong? It’s possible. It could also mean that the Bitcoin hype and the people who believe in the prices rallying thanks to media, are collectively more powerful than technical traders.
Whatever the case might be you still have to consider the fact that new Bitcoins are still being mined every day and the miners are selling their coins for profit. The constant flow of new Bitcoins is slowly diluting the market and making Bitcoin cheaper either until the amount of Bitcoins reaches it’s maximum value or until the process of mining itself becomes too expensive for it to make sense mining them.