Cryptocurrencies

BTC – Beginning of the Week Analysis

So far, BTC has been bullish in August of 2019 (well – actually since the final day of July).

As usual, the mass media is throwing its theories around (such as THIS one) as to why this may be. Most of them are wrong, but let them throw their theories around anyway – it keeps them busy.

Looking at the market broadly, I would suggest that investor confidence is still relatively shaky, despite good 2019 BTC gains. This is evidenced in the poor performance of altcoins, a good indicator that “Adventurous” and “Confident” are not words to be attributed to investors at this point in time. Instead, I think that BTC price has been growing on the increase in trading volume alone (i.e. increased adoption): by now you are all well aware that 2019 volume is massive – even when compared to that of the 2017 bull run. (See volume on chart below)

From https://www.coingecko.com/en/global_charts

Exciting news! I have started working on a new cryptocurrency metric: a quantitative metric used to determine the investor confidence of the market. Honestly I haven’t checked if such a metric exists yet, perhaps I am just re-inventing the wheel. It’s not the “Bitcoin Misery Index” (I’m using a very different method to what Thomas Lee uses) – but it will give similar results. Either way I’m still busy developing it – learning (mostly by trial and error) the right formulas to use in Google Sheets to make it work. Hopefully I will have it finished soon – I’ll be sure to show you the results when (if?) I do finish!

Back to BTC:

While the ever-fickle media with its goldfish-duration memory is certainly suddenly bullish again, I caution against becoming bullish too fast. The charts below will show you why.

BTC has been in a channel for about a month. Back in this post of 16 July, I identified the top of the channel, but the bottom had yet to be formed, so I took it as a pennant instead.

From https://mentormarket.io/cryptocurrencies/bit-brain/btc-11-july/

This made me bullish on BTC in the medium-term, though I soon found out that my pennant was not a pennant at all. Strangely, this has no affect on my medium-term projections for BTC.

Later on BTC dipped, thereby forming a channel, which I then indicated in my 23 July postwhere I concluded that BTC may be forming a Bull Flag.

From https://mentormarket.io/cryptocurrencies/bit-brain/bitcoin-possible-next-moves/

While BTC has not dipped all the way back down to the bottom of that flag/channel, it has also not yet broken free of it.

Here is BTC today:

As you can clearly see on the chart above, BTC is at a turning point. Either it can breakout of the channel and climb, or it can dip sharply back downwards. I will only turn bullish if BTC breaks out of the top of channel and stays out for a day or more. Obviously this is short-term bullish, in the medium and long-terms I am bullish thanks to the bull flag and to the fundamentals of BTC respectively.

Should BTC fail to breakout, then the rejection dip should look something similar to this:

The bottom of the channel also coincides nicely with an already-consolidated support/resistance level in the mid-$7000s to mid-$8000s region. This will provide strong support and should prevent BTC from breaking through the bottom of the channel if it does head back in that direction.

Having said that: take note that similar price movement patterns in 2017 did sometimes end in a flash crash, followed by an equally rapid recovery (the crash and recovery taking only 2 to 3 days in total). The chart below from “Bitcoin – possible next moves” illustrates what I am talking about. See that post for more details and further examples.

From https://mentormarket.io/cryptocurrencies/bit-brain/bitcoin-possible-next-moves/

Summary:

If BTC does breakout within the next day or two, then we may well see an new 2019 BTC high this week. The next most likely option is that it will drop down to the bottom of the channel – still remaining within the confines of the Bull Flag and buoyed by the consolidation which took place in May/June.

Percentage allocation for possible future BTC price movement:

  • BTC breaks out of the top of the channel: 35%
  • BTC heads back down to the bottom of the channel, or perhaps the 0.786 retracement level (as it did last time): 30%
  • BTC heads back down and breaks through the bottom of the channel: 10%
  • Something else (e.g. Sideways movement, movement along diagonal Fib lines): 25%

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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