Bitcoin Price Analysis – Bitcoin Unlimited support plummets

Bitcoin has been trading between ~$1075-1200 this week, according to the BLX, on heavy bullish momentum. Total Network Hashrate continues to make all-time highs, despite the ongoing scaling debate. The Network Hashrate is set for a 4.51% rise on about April 12th, increasing 51.89% year to date.

Over the past week, evidence has come forth suggesting why bitcoin mining chip manufacturer Bitmain continues to oppose Bitcoin Improvement Proposal (BIP) 141, Segregated Witness (SegWit). The covert use of AsicBoost provides a 20% competitive advantage towards mining blocks, and is incompatible with SegWit. There is evidence of it’s existence in current chipsets, but no clear evidence it was used, as the covert form may be completely undetectable. The news preceded is a split in support for Bitcoin Core and Bitcoin Unlimited (BU) this week.

Currently, SegWit and BU support is roughly even, but support for SegWit is expected to grow at a steady pace. SegWit’s testnet mined a 3.7MB block last week, which is almost 4x the current block size ceiling.

Meanwhile, Japanese exchange volume continues to dominate the global market, led by BitFlyer, which currently trades almost as much volume as all of the USD exchanges combined.

Technical Analysis

The Ichimoku Cloud is a constant, auto-drawn indicator which quickly offers a trade an immense amount of valuable information on any timeframe. The cloud is best used at higher timeframes as more data generally provides truer signals and less false positives.

The indicator uses moving averages and dynamic support and resistance to make projections of key zones, as well as capturing 80% of any given trend. As long as the price remains above the cloud, sentiment remains bullish. Price in the cloud indicates a neutral trend, and below the cloud indicates a bearish trend.

When the Tenkan (T) is over the Kijun (K) sentiment is bullish. K over T would indicate bearish sentiment. When the Lagging Span (LS) is above the cloud and above the price sentiment is bullish, below the cloud and price would indicate bearish sentiment. The best entry signals for the cloud occur when trend is obvious, but 1 or 2 of the signals have yet to become confluent with a higher timeframe trend.

On the daily timeframe, mixed messages continue for the cloud signals. Price is above cloud but the TK cross remains bearish.

A strong long entry signal would be the TK cross above cloud, with bids on kijun. A similar setup occurred on February 7th. The strong pullback two days later coincided with unfavorable regulatory news out of China.

Another way to measure a longstanding trend is with a pitchfork. There are a few versions of the pitchfork, beginning in 2015, depending on the exchange your viewing. Be sure to use the log scale and pick an extreme low with a swing high and low.

The median line (red) gives the expected mean of the trend. Price will continually attempt to return to this diagonal. Each diagonal of the Pitchfork can be thought of as a potential reversal zone or support/resistance line. The upper blue diagonal zone being ‘most overbought’ or the top bounds of the trend and lower blue diagonal zone being ‘most oversold’ or the bottom bounds of the trend.

The trend continues with no threat of stopping anytime soon, with price reaching for a return to mean. Should this trend continue to year’s end, an expected price of $1800 is reasonable, based on the lower bounds of the pitchfork.

The four hour Heikin-Ashi (HA) candlesticks can be used to assess the strength of an active trend. Heikin-Ashi candlesticks manipulate the raw open and close data from the previous period to better smooth the trend. Stops may be continually moved up based on the bearish candles in a bull trend, a long-wicked candle, or a doji, which would signify a drop in momentum. Entry usually occurs when at least two candles match the active trend following a pullback or stop out.

Depending on how stops are used, each of these trend flip and continuation trades may or may not have been stopped out on each leg up and pullback. Two HA candles are currently green again, but are showing little to no momentum. Until momentum returns, HA is not showing a strong long entry signal, which would likely have limited upside to the local top of the overarching move down.

In the meantime, the previous bullish butterfly harmonic has played out exactly as expected ,with price currently sitting at A-C diagonal resistance.

There is also another bearish harmonic, at the current level, which has formed off the bullish butterfly. Considered an advanced harmonic pattern, the shark is a bearish harmonic with a target of ~$1000-1050. A stop would typically be placed above the 1.272 fibonacci retracement from point C to D, with a short accumulation zone between point D and the 1.272 fibonacci retracement.

Summary

Evidence for creating an unfair mining competitive advantage has caused BU support to plummet. All long signals on the Ichimoku cloud have yet to flip bullish, but the longstanding pitchfork shows no threat to trend. HA candles are showing a slowing of bullish momentum at the diagonal resistance of A to C on the completed bullish butterfly harmonic. An advanced bearish harmonic has formed forecasting a target between $1000-1050 in the coming days, should the 1.272 fibonacci extension from points C to D hold as resistance.