Bitcoin – 21 January

Last week I wrote a epic article on how I determine Bitcoin trendlines (and more importantly, on how I DON’T!), the Bitcoin Long-term BaseTrendline in particular.

Much has happened with the price of Bitcoin since then.

I still stand by my earlier BTC posts 100%. This one from late 2019 and this one from early 2020 tell you all you need to know about Bitcoin for the foreseeable future, at least from an investment point of view.

But for those who may want to dig into the nitty-gritty a little more, I have been posting a few updates on Twitter about what has happened since. I’ve also reposted much of that in the TIMM Trading Pits. This post will consolidate those ideas. (Check TIMM out if you have’t already done so – some of the best crypto/trading/investing content to be found is distilled into its homepage and archives ).

Let’s take a look:

BTC movements in January thus far

Things started on 14 January when it became apparent that BTC was in surging forward in a lunge towards the upper limit of the venerable descending channel. I didn’t expect a push this early, but one should never rule out the effect of short-term news hype.

Hype is particularly bad at the moment: the Trade War deal, the Iranian conflict, Davos, the US presidential impeachment, the next BTC halving approaching – it’s all helping to make the markets worked up – not that many people have the slightest clue as to how or why such news affects crypto!

On 15 January BTC did reach the top of the channel – and was rejected. It tried again and bounced again…

…and bounced yet again before finally breaking through on 17 January, signalling the end of the descending channel and a change of direction for BTC. A quick run up to $9200 two days later helped confirm the end of the descending channel, and the dawn of a new ascending one.

The series of attempts to break through the six-month old descending channel were a very bullish indicator. They showed that there was enough buying pressure to not only survive rejection by resistance levels, but also to drive BTC to potentially much higher prices.

With the descending channel confirmed dead, I could focus on the Fib levels of the new ascending channel that I had been quietly preparing on my secondary charts. I first published those levels on 16 January, while the descending channel was technically still active.

After the breakout, I published both sets of Fib levels together. It’s a far more busy and confusing chart than I usually prefer, but it illustrates how the old is replacing the new. Charts published after this time no longer need the descending Fib lines on them, though I still leave the old upper and lower channel borders there for now, just so that I can see how far BTC has climbed since then.

It’s important to note that a breakout is a time of uncertainty. Traders can quickly develop buyers remorse and become fearful that they may have “bought at the top” – leading to a sharp decline in buying pressure and a drop of price to lower levels.

In this case, a price drop on 19 January was caught by the 0.786 diagonal Fib, as you can see below.

Since that time (two days ago) BTC has continued to be ruled by the 0.786 Fib level.

We now sit in the situation where BTC is trading at higher prices than what it should be, and is likely to drop towards the Long-term Base Trendline soon, maybe step by step down the Fib levels, maybe in one or two larger jumps. Volume is in decline, always an indicatror that price is likely to drop too.

Irrespective of that, BTC HAS broken free from the shackles of the descending channel which controlled it for the latter half of 2019. BTC is free to climb again.

There is the risk that early hype may continue to drive prices higher. This unfavourable situation would be much like what happened in Q2 of 2019 – prices being driven up to unsustainable high levels, resulting in a long and slow return towards base levels thereafter. I think it’s still too early for a major bull run, so any half-baked attempt at one now will only delay the proper one later on. Personally I’d rather just see the price grow slowly, but that’s just my little pipe dream.

I expect that 2020 will look similar to 2016 on the charts – a long, slow climb – but that’s only the most likely situation. Anything can happen in crypto.

For the record, this is what the charts look like right now:

Yours in crypto

Bit Brain

All charts made by Bit Brain with TradingView

“The secret to success: find out where people are going and get there first” 

~ Mark Twain

“Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful” 

~ Bit Brain

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