Bitcoin Price Analysis - Buy the rumour, sell the news

With the deadline on March 11th for a Securities and Exchange Commission (SEC) decision on the COIN exchange-traded fund (ETF) quickly approaching, US Dollar demand continues to drive bitcoin higher. A recent outage on GDAX, one of the few bitcoin exchanges accepting USD customers, did not dampen the rally and suggests a high amount of traffic to the site. Although the ETF would likely increase bitcoin price long-term, traders may “buy the rumor, sell the news.” Three similar events illustrate how the market has previously reacted.

Bitcoin Price Analysis Mar 4 2017 1September 23rd, 2014 - PayPal accepts Bitcoin

 Bitcoin Price Analysis Mar 4 2017 2December 11th, 2014 - Microsoft accepts Bitcoin

 Bitcoin Price Analysis Mar 4 2017 3January 26, 2015 - Coinbase launches Lunar exchange (GDAX)

In the chinese market OKcoin futures premiums are currently positive again, although there is still a negative premium between CNY and USD. This suggests that CNY traders remain hesitant to re-enter the foray amongst frequent and random People’s Bank of China (PBoC) announcements and regulations.

Bitcoin Price Analysis Mar 4 2017 4Source: @FomoBot on Telegram

Bitcoin Price Analysis Mar 4 2017 5Source: @FomoBot on Telegram

According to BraveNewCoin’s volume index, Japan has surpassed an astonishing 50% of bitcoin volume over the past 24 hours.

Bitcoin Price Analysis Mar 4 2017 7

bitFlyer leads the pack, with more volume traded over the past day than all USD exchanges combined. Quoine, coincheck, and Zaif share the remainder of BTCJPY volume equally.

Bitcoin Price Analysis Mar 4 2017 6

 

Additionally, BTC has broken JPY and USD gold parities but has not yet broken CNY gold parity. This suggests that current demand is largely driven out of JPY and USD, which logically makes sense based on total volume for each country. It’s unclear whether or not the JPY volume is genuine trading, or similar to CNY volume before the PBoC’s regulatory crackdown.

Bitcoin Price Analysis Mar 4 2017 8Kraken JPY price

Bitcoin Price Analysis Mar 4 2017 9Coinbase USD price

Bitcoin Price Analysis Mar 4 2017 10OKCoin CNY price

Meanwhile, the Bitcoin hash rate continues to grow, strengthening the security of the network. This is a very bullish indication which shows continued growth metrics. Unfortunately, an increase in hashrate cannot mitigate the large number of unconfirmed transactions, currently around 80,000. SegWit signalling remained flat, at around 26%, until a recent uptick to around 35%. China holds the most mining power based on geographic distribution. We likely will not see an active SegWit protocol until Chinese miners have an impetus to do so.

 Bitcoin Price Analysis Mar 4 2017 11

Long Term Technical Analysis

 

While longer timeframes always provide the overall trend, the Ichimoku Cloud indicator provides four key indicators that can offer more detail. As long as the price remains above the cloud, sentiment remains bullish. When the Tenkan (T) is over the Kijun (K) sentiment is bullish. When the Lagging Span (LS) is above the cloud and above the price sentiment is bullish. Currently, on the daily, weekly, four hour and one hour timeframes, all signals are bullish. This also suggests that the current bull trend is in no threat of extinction.

Bitcoin Price Analysis Mar 4 2017 12One week chart

Bitcoin Price Analysis Mar 4 2017 13One day chart

Bitcoin Price Analysis Mar 4 2017 14Four hour chart

Bitcoin Price Analysis Mar 4 2017 15One hour chart

In the Ichimoku Cloud system, the best entries occur when signals flip bullish or bearish. Considering all the signals are already bullish on these timeframes, traders may place bids on the kijun of either the four hour or one hour chart and wait for a kijun bounce, one of which has occurred recently on the thirty minute chart. This strategy provides a re-entry into an already well-established trend. The exit signal would be a bearish TK cross.

Bitcoin Price Analysis Mar 4 2017 1630m chart

Bitcoin Price Analysis Mar 4 2017 17Previous 30m TK Cross

The Ichimoku Cloud is excellent at determining entries and exits, but not so useful for predicting targets in the current trend. Indicators such as Fibonacci Extensions and Pitchfork, can add further detail.

Fibonacci zones can be drawn from the extreme high to the extreme low for any price movement. Within this price range, static support/resistance lines are drawn, and can be thought of as Potential Reversal Zones (PRZ) for price. These are levels that traders often use to open or close trades, making them more consistent. Fibonacci retracements also include Fibonacci Extensions which give additional support/resistance above or below the extreme high to an extreme low of any price movement, the 1.618 fibonacci extension being the most widely used.

Each of the rallies since 2015 have reached ~2.618 fib at their peak. Price is currently sitting at the 2.618 fib of the previous move, while yielding a target of $1875 for the next move. The 1.618 of the entire rally is ~$1800.

Bitcoin Price Analysis Mar 4 2017 18 BNC Bitcoin Liquid Index (BLX)

A simple way to determine if an asset's price is overbought or oversold within a trend is whether or not there is deviation from the mean of the trend. One way this can be done is by adding a Pitchfork, with an anchor at the low in the trend and another high and low in the trend. The mean of the trend being the Pitchfork Median Line (ML).

The ML acts as a high probability magnet for price, where it will either accumulate, zoom through, or bounce off. This may sound both unhelpful and convoluted, but essentially the ML can be thought of as a PRZ, similar to that of Fibonacci Retracement levels.

Each diagonal of the Pitchfork can be thought of as a PRZ 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.

A Pitchfork can be drawn on any timeframe and can be drawn multiple times over a given trend. This leaves us with one pitchfork encapsulating the entirety of the trend as well as other Pitchforks within the given trend.

Bitcoin Price Analysis Mar 4 2017 19

 

Diagonals show resistance and support whereas the boundaries themselves act as an oversold or overbought indicator. Price is currently above the median line but not in the overbought quartile, which peaks at around $1532 before the COIN ETF decision. Once the decision is public, expect the announcement to supersede all technical analysis.

Bitcoin Price Analysis Mar 4 2017 20The previous pitchfork yields an even high upper limit of around $1800 in the coming weeks.

Bitcoin Price Analysis Mar 4 2017 21The pitchfork beginning in 2015 has price well above overbought conditions.

Conclusion


With gold parity in the rear view mirror in USD and JPY terms, the next big market move is the SEC ETF decision on March 11th, which is a Saturday, so expect an announcement on Friday, March 10th. Technicals remain heavily bullish with price targets between $1400 and $1800 in the coming weeks. Expect the SEC decision to negate any technicals in the near term when the announcement is public. I always discredit the ‘buy the rumor, sell the news’ paradigm but it occurs more often than not.