Cryptocurrencies

Bitcoin – quick update

BTC is forming a converging triangle (again). The triangle has been confirmed and is nearing its apex – the price is already in the breakout zone of the triangle.

The exact limits and shape of the triangle are open to the interpretation of the analyst. The daily chart lacks the necessary resolution to plot it properly, so here is my best take on it – plotted on a 4h chart.

Breakout direction is inconclusive. There are strong arguments to be made for various support levels just below the current price (implying that price is more likely to rise than fall); this appears to be the popular feeling among other analysts. However, these are strange times. I consider events such as the decisions being made by The Fed and the US circus presidential election to have a larger effect on the financial markets than what technical indicators have at the moment.

Having said that: I have observed that Bitcoin in 2020 has respected a special support line of its own. Call it the “Covid madness support line” if you will, it’s the solid white line on the chart below. Extended from a (possibly unrelated) low price encountered on 17 Dec 2019, this support line has featured on several occasions in 2020. It arrested price falls on 10 May, 27 Jun, 05 Jul, a week in late July, 08 Sep and 29 Sep. It may again support any further downwards movement in price in the near to mid-term future.

Obviously this support line was smashed in March/April, but then, what wasn’t?

Zooming out, we should note that Bitcoin is still trading at prices below that of my Long-Term Base Trendline. That means that either my trendline is wrong, or that Bitcoin is chronically oversold, or both.

The trendline is visible as the long dotted line on the chart below.

I may be good, but I’m not infallible. Therefore I have been experimenting with a version of this trendline that tracks total market cap instead of BTC price – in a bid to find something that has fewer “exceptions to the rule”.

These experiments have not been successful, though I haven’t abandoned them (we require several more years of data before we can plot BTC trendlines with greater predictive accuracy). For now, it is easier to chart BTC price than market cap.

Looking at all the information available, I can see without a shadow of a doubt that BTC does follow a base trendline. Though my base trendline for BTC has often been breached this year, I am still satisfied that – for now at least – it still offers an excellent guide as to where the BTC base price should be at any time. It could probably be improved by tracking market cap instead, but it’s still good enough for the time being.

Conclusion:

As is the norm for crypto in general, especially in 2020, this leaves us with a somewhat inconclusive conclusion. My analysis tells me that BTC does have support at this level or not far below it. My continued faith in my Long-Term Base Trendline for BTC leads me to conclude that it remains oversold, implying that Bitcoin is a great buy at current prices.

However, with the trendline breached, we should deduce that the market remains terribly uncertain and that panic selling could well result in further flash crashes or even prolonged periods of artificially low prices. Watching the financial and political news should only reinforce this belief.

But – and this is speculative to a degree – the gross mismanagement of; well ABSOLUTELY EVERYTHING (by our beloved politicians and bankers), could just as easily result in massive price rises in the crypto world. In fact, this is what I (and most others) expect, though I also expect that most major events will begin with a large FUD-induced price dip.

For now I consider a small rise to be the most likely next move in BTC price. But this IS 2020, so who knows?

Yours in crypto

Bit Brain

All charts made by Bit Brain with TradingView

R.I.P. Eddie Van Halen

“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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