BTC from optimism to despair

This time last week, Bitcoin was making headlines, trading just below $14k. Up over 75% from its June low near $7.5k and more than 200% above where it started the year. “Flight to safety” type buying ahead of last weekend’s G20 meeting, increasingly aggressive rhetoric between Iran and the U.S., as well as optimism that Bitcoin was moving closer to mainstream acceptance the main reasons sighted behind surging prices.

This time last week, Bitcoin was making headlines, trading just below $14k. Up over 75% from its June low near $7.5k and more than 200% above where it started the year. “Flight to safety” type buying ahead of last weekend’s G20 meeting, increasingly aggressive rhetoric between Iran and the U.S., as well as optimism that Bitcoin was moving closer to mainstream acceptance the main reasons sighted behind surging prices.

Seemingly validating the legitimacy of the rally, two exchanges which offer investors a platform to trade Bitcoin confirmed record investor interest. The Chicago Mercantile exchanged noted on the day that Bitcoin traded to near $14k, Bitcoin futures traded a record $1.7B in notional value surpassing the previous record by more than 30%. Three days later, the founder of BitMEX Arthur Hayes noted in a tweet, that annual trading volume on his exchange had surpassed U.S. $1 trillion.

As those familiar with bitcoin’s volatility know after a wave of surging prices and optimism, a setback is never far away. The trade war truce that the G20 Summit delivered along with an outage on popular cryptocurrency trading platform Coinbase has resulted in the price of Bitcoin dropping to a low near $9.6k overnight, over 30% below last week’s high-water mark.

The rapid rise and subsequent fall in Bitcoins price will do little to ease the concerns of those who point out that Bitcoins excessive volatility means it will never provide a reliable and stable store of value. However, for trading folks, Bitcoins volatility is one of its chief attractions. With that in mind, let's turn to the charts.

Last week in this article https://www.cityindex.com.au/market-analysis/what-to-do-about-bitcoin/ we highlighted some initial signs of rejection as Bitcoin faded from ahead of key resistance near $14k and that that the appropriate place to buy Bitcoin longs, was back towards support near $10/9k.

After reaching this level overnight, a potential daily bullish reversal candle is forming. At the very least this warns that prices are looking for a base and that Bitcoin may see a short-term rally back towards 12k. However, while the price target for the pullback has now been reached, the speed of the decline has been too rapid to fit the ideal criteria of a completed corrective Wave IV pullback (Elliott Wave). Hence, while a short-term bounce is possible, my preference is for Bitcoin to follow the road map as outlined on the chart below.

BTC from optimism to despair

Source Tradingview. The figures stated are as of the 3rd of July 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

Disclaimer

TECH-FX TRADING PTY LTD (ACN 617 797 645) is an Authorised Representative (001255203) of JB Alpha Ltd (ABN 76 131 376 415) which holds an Australian Financial Services Licence (AFSL no. 327075)

Trading foreign exchange, futures and CFDs on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange, futures or CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange, futures and CFD trading, and seek advice from an independent financial advisor if you have any doubts. It is important to note that past performance is not a reliable indicator of future performance.

Any advice provided is general advice only. It is important to note that:

  • The advice has been prepared without taking into account the client’s objectives, financial situation or needs.
  • The client should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before following the advice.
  • If the advice relates to the acquisition or possible acquisition of a particular financial product, the client should obtain a copy of, and consider, the PDS for that product before making any decision.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.