Bitcoin Price Analysis - Bullish continuation

Bitcoin has now recovered most of the 40% decline which occurred throughout the month of September, which was largely due to regulatory news out of China. The leading cryptocurrency's market cap now stands at US$75 billion.

Bitcoin Price Analysis 9 Oct 2017 1As the first successful decentralized cryptocurrency, Bitcoin has traditionally dominated the market, largely due to first mover advantages including network effect. While the open source project continues to attract more capital, more and more competitors, alternatives, and ICOs have done the same. Bitcoin's market share has eroded significantly in 2017.

Bitcoin Price Analysis 9 Oct 2017 2Ethereum had a real chance of breaking Bitcoin’s market cap mid-June 2017, shortly before the SegWit protocol upgrade was certain. Now, Bitcoin is looking to break the 50% total market cap level again as the ICO parade has slowed and SegWit is live.

Bitcoin SegWit transactions per block, which enable bigger blocks above 1MB, continues to rise, and now accounts for ~9% of all transactions. Adoption, which would increase significantly if more popular addresses use SegWit addresses, has been slow but steady since release.

Bitcoin Price Analysis 9 Oct 2017 3As SegWit transactions use fewer bytes per block than legacy transactions, SegWit transactions will always be cheaper to use. SegWit addresses start with 3 instead of 1 and are increasingly supported through hardware wallets, such as Trezor and Ledger, as well as many software wallets.

In the meantime, Bitcoin hash rate and difficulty continue to rise. The large dips in hash rate are due to a group of miners switching between Bitcoin and Bitcoin Cash, likely based on profitability.

Bitcoin Price Analysis 9 Oct 2017 4Bitcoin Cash now has a market cap of US$5 billion, but has gained little traction within the community. The network has been marred with irregular block times and several difficulty adjustments. Based on the price, recently dropping to 0.01BTC, many holders disapprove of how the network has behaved.

Bitcoin Price Analysis 9 Oct 2017 5Bitcoin exchange-traded volume has been shared by Japanese Yen (JPY) and US Dollar (USD) markets over the past 24 hours, with most of that volume coming from Coincheck and Bitfinex.

The Chinese Yuan (CNY) pair holds a negative premium on the index, suggesting sustained selling with a lack of demand. Conversely, the South Korean Won (KRW) pair holds a premium, suggesting sustained buying. In both cases, the differentials suggest difficulty with arbitrage in those countries.

Bitcoin Price Analysis 9 Oct 2017 6Global over-the-counter (OTC) volume has experienced a recent drop, but still remains near all time highs. Volume in Chile, Turkey, Ukraine, and Venezuela, all countries with an uncertain political future, have made new highs this week.

Bitcoin Price Analysis 9 Oct 2017 7Technical Analysis

The bull trend beginning in 2015 continues to march on, irrespective of anything Chinese regulators release or the SW2x faction proposes. Ichimoku Cloud, Pitchforks, and EMAs help illuminate the certainty of the trend.

The weekly timeframe shows all Cloud metrics bullish. Cloud, Kijun, and Tenkan continue to slope upwards, showing various levels of support. No entries can be gleaned from this timeframe other than a long entry when price make new highs.

Bitcoin Price Analysis 9 Oct 2017 8On the daily timeframe, Cloud shows a textbook bull trend with multiple support tests and continuation. A recent bullish TK cross above the Cloud is highly suggestive of bullish continuation as well.

Bitcoin Price Analysis 9 Oct 2017 9The past three bullish TK crosses (green arrow) have yielded a trend of 34%, 155%, and 80% respectively - or ~90% on average. Lagging span remains slightly below price but will emerge above price shortly, completing the long entry checklist. Bids on the Kijun, around US$3980, are always a viable strategy for re-entry. Expect a test of the Kijun if price fails to make a new all time high.

On the four hour timeframe, all Cloud metrics are again bullish. Since the Kumo breakout prior to October, there has been one Kijun bounce around October 5th.

Bitcoin Price Analysis 9 Oct 2017 10A bearish divergence was not created when price made a higher (not shown) but is something to watch for on the next rise on this timeframe, should waning bullish momentum arise.

Pitchforks are especially useful for price projection beyond all time highs when there are no support or resistance levels. The median line (red) of the Pitchfork 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 yellow diagonal zone being ‘most overbought,’ or the top bounds of the trend, and lower yellow diagonal zone being ‘most oversold,’ or the bottom bounds of the trend.

Two viable Pitchforks are possible depending on the desired amount of data capture. The first shows price at the median line (ML). A break of the ML would suggest a maximal price target of the yellow diagonal zone. Price can also continually hug the ML as it consolidates and makes a decision to continue higher or again test support lower.

Bitcoin Price Analysis 9 Oct 2017 11The second Pitchfork shows price in the oversold diagonal zone. As long as price does not close outside of the Pitchfork, the ML becomes a highly probable target, currently ~US$6700.

Bitcoin Price Analysis 9 Oct 2017 12The 50/200EMAs on the daily timeframe have supported price since the beginning of the trend in 2015. The 50EMA is the expected continuation support, whereas the 200EMA is the pullback support zone.  

Bitcoin Price Analysis 9 Oct 2017 13The distance between the EMAs can be seen as an overbought or oversold indicator. As the trend hastens, the EMAs become wider, suggesting overbought conditions. A candle close below the 200EMA is suggests that this particular trend would be in trouble. A bearish 50/200EMA cross, or Death Cross, would be a nail in the bull trend coffin.

The 50/200EMAs on the four hour timeframe have continually crossed and recrossed since the beginning of 2017. Each bullish recross has been a strong bullish continuation signal. The past three bullish 50/200EMA crosses have yielded a trend of 47%, 175%, and 105% respectively - or 109% on average.

Bitcoin Price Analysis 9 Oct 2017 14Conclusion

After once again shedding the burden of Chinese influence, price has rebounded almost completely. Bitcoin also continues to gain traction in countries with political strife. Mining metrics continue to rise as Bitcoin’s direct competitor, Bitcoin Cash, falters. Concerns around any future forks, including SegWit2x, will most likely remain muted. There will be many more forks in the future.

All technicals above point to a healthy bull trend with strong bullish continuation likely. If price successfully breaks the previous ATH, targets above $6700 are very likely.