A General Comment Of Bitcoin Market Through The Second Half Of July

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Despite a spike in Bitcoin price from $6000 to $8500 beginning in the second half of July, the price reversed to a bearish shape at the end of July. The pattern has continued into August. By the time the report is drafted (August 6th), Bitcoin is trading around $7000, resulting from a 15% drop in price over the last week. At the same time, Bitcoin takes almost half of the total cryptocurrency market capitalization.

The trigger for the ups and downs of Bitcoin price has been primarily attributed to the application and rejection of the Winklevoss ETF. While application and possible acceptance hinted institutional participation in crypto, and thus stimulated the market in the second half of July, the rejection made the market return to the latest wave of bearish pressure.

There is hope that the CBOE’s (Chicago Board Options Exchange) ETF will be approved by the SEC on August 10th. According to some sources, “the CBOE based VanEck SolidX Bitcoin Trust ETF has the highest chances of getting accepted. It remains the clear expectation here and that hasn’t changed one bit. It would be a major upset were an approval be denied. Again, this is about when, not if.” Clients begin investment in the first quarter of 2019 if CBOE’s application is passed.

In addition, there is more positive news in the past week. For example, the owner of the NYSE, ICE (Intercontinental Exchange) announced Friday that It plans to launch a digital assets platform and a bitcoin futures product called Bakkt. BCG, Microsoft and Starbucks are also reported to participate in the project. The project allows clients and institutions to trade, store and spend digital assets. Other good news includes Goldman Sachs opts for Bitcoin Custody Service after it launched Bitcoin Futures trading in May.  Meanwhile, Coinbase Custody Service considers an additional 37 new assets including Ripple, EOS, Monero, Vechain, Cardano, Bitcoin Gold and Telegram.

The market continues bearish shape despite the positive news. However, it should be expected in the long run, that with the pooling of institutional capital, the cryptocurrency market has a long way to reach maturity. Whereas, in the short run, the bull is focused on the August 10th decision on the CBOE ETF proposal.

Technical Analysis

Technical analysis on the period spans from July 15 to July 31 regarding the pair BTC/USD on BitFinex. The time division is 3h; 20 Bollinger bands are superimposed on the candle chart, purple lines show trend support; 20 MA is superimposed on volume; the second part displays the 3,14 K (blue) and D (red) stochastic RSI lines with the 20-80 band superimposed; 9 ROC is displayed on the last part of the graph.

This analysis can be decomposed into three shorter phases: July 15-20, July 20-26 and July 26-31.

July 15-20: overall uptrend from 6.5K to 7.3K, mainly supported by unexpected high volumes, more than 4 times average volume over the period. As a consequence, Bollinger upper bands are broken out twice. Some high net worth individuals show confidence in the market as the volume is high and sparse. This is confirmed by the fact that candles constantly touch the B upper. ROC is largely positive while high volumes highly impact the Stoch RSI, indicating overbought positions and then shifting to oversold towards the end of the period. The HNWI dragged the price up and realized some profits.

July 20-26: overall uptrend from 7.3K to over 8K, supported by retailed investors who regained confidence after the 7K psychological level was reached as shown by the flatter uptrend support slope. Volume seems more consistent with a general bell shape fitting curve and general increase on average. Again, B upper is touched almost all the time. The Stoch K and D grow steadily to stabilize over the 80 level and remain overbought for an extended period of time. In the mean time, ROC grows linearly in the positives following the B and Stoch RSI.

July 26-31: overall stabilization around the 8K level with a general decrease in average volume. Sparse high volume are extremely rare. The B cloud funnels in while candles remain just above the middle B. The trend support is exactly horizontal. The 20-80 band almost exactly encompasses the K and D over this last period. The ROC confirms the stagnation trend while matching almost perfectly the null axis.

Overall, a regain of confidence in the market and some exogenous factors might have positively impacted the market, breaking out the 7K level. Retailed investors then followed the trend which stabilized around 8K. Note that this is part of a bigger picture where BTC is oscillating between much deeper 2-4 years support lines. If the overall tendency continues, BTC will drop to 3K by the end of the year. However, this scenario seems unlikely as the cost of mining 1 unit is of 6K as of today. 

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