Bitcoin Price Analysis - Bullish trend support

Bitcoin has been trading between $940-1060 this week, according to the BLX, on low volume of a consolidating nature. The Network Hashrate gained 5.03% on March 30th, and has increased 47.34% year to date.

Bitcoin Unlimited (BU) and Bitcoin Core (BC) factions, among others, continue an intense debate and roadmap discussion over blocksize and scaling. BU vs BC miner signalling has gone back and forth this week, with BU growing ever closer to 51% needed to attempt a hard fork. Nodes however, continue to remain heavily in BCs favor.

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LocalBitcoin (LBC) volume continues to rise worldwide to record levels in many countries.

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The lion’s share of Chinese volume post-regulation continues to flow through LBC.

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Australian LBC volume is also near record levels, continuing a rising trend.

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The contrast in CNY vs AUS LBC volume is likely due to availability and access to exchanges and on-ramps. CNY LBC volume shows the exact week when availability and access was largely cut off by regulatory changes. AUS LBC volume suggests availability and access has never solely met demand, or users have not been within the regulatory framework for those exchanges.  

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Over the last 24 hours, USD has regained the lead in trading volume, with CNY volume far below both USD and JPY.

Technical Analysis

Traders need to be able to immediately assess whether or not a trend exists in a market. Two of the best and easiest ways to that are with Ichimoku Cloud and Pitchfork.

Ichimoku Cloud 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.

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The cloud on the daily timeframe is giving mixed signals. Price is above cloud, and cloud is bullish, suggesting the long standing bull trend remains intact. However, there is a bearish TK cross and LS is below price, meaning the long entry signals have not aligned yet. A long entry signal, as per the daily cloud, would occur on the candle close when the TK recrosses bullish. Bullish TK recrosses above the cloud have not been the most accurate signal for a long entry.

Even though the entry signals are not confluent on this time frame, we can look to lower time frames for long entries. While the spot price is above cloud and cloud is bullish, there is typically more money to be made going long, rather than going short. Because the flip in signals is days away, we can either sit out of the market entirely, or, choose to trade lower timeframes.

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The pitchfork is drawn from an extreme high or low to another extreme low or high with an anchor point being a previous extreme low or high. 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.

This indicator is considered invalid once price closes above or below the pitchfork. Although price closed below this current pitchfork for several candles, it is attempting to find support on the bottom diagonal, suggesting that the trend may be back on it’s previous course. Should support succeed, the first target is the next diagonal up, and the ultimate target being a return to the median line.

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On a four hour time frame, the price has closed inside of the Ichimoku cloud, with a bullish TK cross. Bullish traders may be inclined to instigate an edge to edge trade, meaning, an entry signal occurs when a candle closes in the cloud with the target being the opposite edge of the cloud. The stop is typically either the kijun or the bottom of the cloud. The expected target is ~$1104.

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There is also a building inverted head and shoulders pattern, a bullish reversal signal, best seen on the two hour time frame. The pattern includes a descending volume profile, a hallmark of most chart patterns. Extrapolating this pattern trajectory brings the price back to the local high, ~$1114, followed by a bounce down from horizontal resistance, and then support again near the horizontal support provided by the previous shoulder, ~$950-970. The right shoulder does not always need to fall to the exact horizontal support of the left shoulder, but it often does. The horizontal resistance may be a diagonal as well.

Once the pattern completes, there is often a breakout on volume with a pullback to the previous support, known as a throwback. Traders that miss the entry on the completion of the pattern, will most likely enter long entry bids at the horizontal or diagonal support level.

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On the one hour time frame, all cloud signals recently aligned bullish to allow for an excellent entry. Price was already above cloud and cloud was bullish. TK crossed bullish and LS closed above price. This long entry is also echoed with the bullish pennant chart pattern.

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As the flag forms, there is already a bullish bias. The entry signal occurs once price breaks diagonal resistance, which is currently the case.

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Lastly, there is also a bullish butterfly harmonic which completed on March 25th. The target zone for a harmonic pattern is usually between the 0.50-0.618% fibonacci retracement levels. The second target is the diagonal resistance from point A-C

Summary

The Bitcoin blocksize debate rages on around social media and remains divided between miners, who are pushing for Bitcoin Unlimited, and nodes who strongly support Bitcoin Core. LocalBitcoin volume continues on a rising trend in many parts of the world. Yuan exchange volume continues to be drastically diminished due to regulatory constraints. Technicals suggest an intact long standing bull trend with immediate bullish momentum to a confluence of resistance between ~$1100-$1137.