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Last week has seen another deep dip of Bitcoin price. The price pushed lower to $5,858 on August 14th, 2018, according to Bitfinex data, though at time of writing, Bitcoin has been up to $6412, regaining 9% from the almost yearly low.
Some have blamed the bleeding to another SEC’s decision delay on CBOE’s ETF. However, the action has been anticipated by much of the market. Other factors in addition to SEC’s decision might draw down the price as well.
The settlement of futures is among such factors. On August 15th the XBTTM bitcoin futures contract expired and cash settled. As Fundstrat’s Lee said “Bitcoin sees dramatic price changes around CBOE futures expirations,” it is without exception the same happened again in August.
Through the introduction of bitcoin futures means that large financial institutions can have a touch of Bitcoin without really getting involved in the business of buying, holding and selling cryptocurrencies. It also has brought pessimists who win by betting on a Bitcoin decline. Since last December, it has been reported that futures contracts brings victory to the bear side over bull side.
In fact, during the bearish shape, many have lowered their expectations for Bitcoin. For example, Tone Vays targets the price of Bitcoin around $5000 or lower so it will be without surprise to see price dips deeper down in the future. Institutional investors are not expected to get involved directly in cryptocurrencies any time soon. In addition, scam coins might blow up along the way, drag down credibility and popularity of cryptocurrencies in general and in turn bring down the price of Bitcoin.
Maybe then the question to ask is, is this the start of a bear market or just a return to normalcy? It is true that the price is down over 50% this year, however, it should be noted last year in August Bitcoin was traded around $3,000. Perhaps we are seeing a return to the realistic valuation of Bitcoin after it has gone wildly to gain more than 1400% increase over 6 months time.
The 6 month rush has translated buying Bitcoin into getting rich over night and brought scammers and pitchmen to the Blockchain industry. However, the dream of becoming
millionaires overnight hurts the growth of industry and technology in the long term. In the bearish market with less “to the moon” talk, scam coins will disappear and those who are left will continue developing the technology and building the crypto economy, and in this respect, it is not the end of the world for Bitcoin to go further down.
In the technical analysis, data is pulled from Bitfinex, with 3-hr candle chart, volume, RSI, Stochastic RSI and CMF displayed.
Having hit $5,858 the lowest level since February on August 14th, 2018, according to Bitfinex data, the price quickly recovered from bleeding to reach $6,591 in the following day and closed at $6,380 on the same day, August 15th. From the 15th on, the price has been squeezed into a narrow range, with support level around $6,300 and resistance level around $6,500. The fluctuation of Stochastic RSI matched the price fluctuation during this period well as seen in the graph.
However, as the green line describes, the channel of the price fluctuation as well as that of the Stochastic RSI have tightened during this period; the pattern indicates a close breakout either in bullish or bearish shape.
Omkar Godbole, an analyst at Coindesk, is counting on the tightening channel ending up with a bullish rally similar to what has happened in April. He pointed that “Back in April, the cryptocurrency traded around $6,800 in the first 11 days before rising sharply above $8,000 on April 12th.” However, the market tone is more pessimistic now than in April, which suggests a
difference in the situation this time. In addition, short positions also confirm with bearish shape. The short positions on Bitfinex reaches $39,625, a level only lower to that in April, and usually the sharp rise of the short positions signals an upcoming sell-off.
Given the condition that both RSI and CMF do not hint particular direction of market movement as shown in the graph and possible delay of decision to approve another bitcoin futures backed ETF on August 23rd might cause more FUD selling, the price will likely break the support and set a new yearly low.