Bitcoin Price Analysis – Consolidation continues

Bitcoin has continued consolidating near all time highs over the past week, with little price action. Hash rate is also essentially unchanged, while SegWit is on track for lock-in and activation sometime later this month.

All eyes were on the Bitcoin Cash (BCH) fork of Bitcoin, which occurred on August 1st. It’s had a few issues from the start. Initial hash rate was extremely low. BCH still needs several difficulty adjustments before miners are incentivized to switch from any profitable cryptocurrency.

While a select few miners have begun mining BCH, block times and confirmations have been highly variable, with up to four hours between blocks. Below is a visualization of the mempool.

Early trading on ViaBTC, who was accepting single confirmations of BCH, had several large sell offs, timed with the initial few blocks.

Additionally, due to problems on their end, Bitfinex distributed about 15% less BCH than was owed to their customers. Trezor, a hardware wallet, also initially had problems distributing BCH to their users. In the mean time, Coinbase reversed their initial stance on on the digital asset, after they were threatened with a class action lawsuit for not distributing BCH to their users.

With liquidity low across the board, slow confirmation times, and mining centralization, it’s far too early to speculate on the true price of BCH or whether it will be successful in any way.

In the meantime, despite the dead and then undead COIN ETF, the Winklevoss twins are back at it again. It was announced this week that the Chicago Board Options Exchange (CBOE) will use the Winklevoss Bitcoin exchange, Gemini, to provide market data for potential derivatives products.

A futures product is planned for the fourth quarter of 2017 or early 2018 pending the US Commodity Futures Trading Commission’s approval. In the press release, CBOE acknowledges that, “trading volume of the bitcoin market has grown substantially in the last two years.”

One veteran institutional trader told BNC, "If the CBOE obtains regulatory approval to launch a Bitcoin future on the Chicago Futures Exchange, I expect it to do well based on the grandfathered institutional liquidity pools as well as exposure to traditional brokers and retail order flow. With volatility flattening out in most sectors, trading firms are excited about the potential of a traditionally listed volatile asset. The added interest can only be a boon to the underlying market price of the Bitcoin asset.”

Bitcoin Technical Analysis

Ongoing consolidation with several failed breakout and breakdown attempts may represent the underlying fundamental changes surrounding the Bitcoin protocol happening this month. With continued consolidation, there is very little new to say this week on the road map or price targets. There are two building chart patterns, both of which represent continuation. There is a building ascending triangle, with a projected target about $4000, and inverted head and shoulders with a projected target around $3200.

An alternative roadmap would look similar to a Wyckoff distribution phase, where this would essentially be the top of the current trend. A failed breakout above $3000 and a successful breakdown below $2000 would be conclusive for a distribution phase.

Conclusion

The Bitcoin Cash fork has come and gone, with the event itself continuing to show Bitcoin’s anti-fragility. Whether BCH will gain any traction remains to be seen, but it certainly will create brand confusion if it becomes more popular.

While there are several chart patterns representing continuation, continued stagnation in this price zone may match Wyckoffian distribution market structure. However, it is difficult to make this assessment until after SegWit is activated as this represents a substantial increase in network efficiency and should therefore increase price long term as well.