Bitcoin Price Analysis – Japan take over volume lead

As price has breached all-time-highs (ATH) today, there are some rumblings that the hacked coins from Bitfinex were entering exchanges, which is largely false. Coins that have not moved since the 27th of January, which includes 2,072 transactions and ~118,880BTC, have remained stagnant. Coins which were spent on the 27th of January, including 196 transactions and ~876BTC, continue to move to various locations across the blockchain.

According to Chris Ellis, Bitfinex Community Liaison who is currently investigating the hack, “Some of the coins have gone to various exchanges, websites, or services, including OKcoin, but there is no way of knowing if that entity is the same as the entity who hacked the coins. It is very unlikely there is any association between the two parties.”

Ellis goes on to say that this is a complex situation with ongoing blockchain investigation. This illustrates the danger of blacklisting coins or attempting to track coins on the blockchain and entangling innocent individuals who do not otherwise know coins they are receiving were in any way involved with any nefarious activity.

It is important from a trading perspective to understand where these coins are as they represent potential selling pressure which has yet to hit any exchange, over-the-counter or otherwise. If bitcoin addresses known to be held by Satoshi Nakamoto where to be found moving, there would also be a similar and greater concern regarding selling pressure. Nakamoto is thought to own 1 million bitcoin or more.

There has also been a massive spike in interest of the Winklevoss COIN ETF over the past 90 days, according to Google trends. The SEC decision deadline regarding the COIN ETF is on March 11th. This means that there may be a decision anytime between now and that date.

If we compare Bitcoin to a public offering, it’s in the pre-IPO phase. While there are a few on/off ramps, including exchanges, public access to bitcoin is quite limited. Access to an ETF under regulatory purvey would not only instill investor confidence but would boldly increase access, therefore increasing demand.

Globally, LocalBitcoin (LBC) volume has continued to make higher highs almost every week. In China, Chinese exchange trading volume has declined due to additional regulation pressure from the People’s Bank of China, while LBC volume in China skyrocketed to 5,000btc last week.

In contrast, Japan’s LBC volume is relatively unchanged week over week whereas their exchange volume is the highest of any globally. LBC is one of the few places where on-ramping occurs that also tracks volume. However, buyers may pursue over-the-counter trades, and this volume is not publicized.

On a technical note, there are about 80,000 unconfirmed transactions waiting to be sent through the blockchain. Needless to say, the network is quite busy. Block size also continues to hit the 1MB ceiling. Although it is easy to spam the network with low fee transactions, that artificially inflate metrics like unconfirmed transactions, the current recommended fee for including a transaction in the next block is 120-140 satoshis per byte or ~0.14-16 cents per byte.

The network as a whole is largely at or near capacity regarding transactions per minute. This means transactions fees will continue to push higher and higher, as lower fee transactions will lose priority. Miners may be happy with this, as they continue to collect more fees, but users may seek other avenues to transact, especially for microtransactions, until a block size solution such as SegWit becomes active.

Long Term Technical Analysis

The BLX made a new ATH today. The previous ATH was fueled by an extremely positive U.S. Senate hearing, legitimizing the currency to many people. A lesser known force to those outside of the Bitcoin community, dubbed The Willy Bot, also aided in artificially driving up Bitcoin price. Willy Bot is reported to have been buying “a random number between 10 and 20 bitcoin…every 5-10 minutes, non-stop, for at least a month on end until the end of January.” The market structure of the previous ATH showed an “M for murder” double top, which failed to hold above established resistance turned support.

This simple market structure may recur when a new top is established beyond the current price. On higher timeframes, large rejection wicks, or tweezer top’s will also suggest a trend reversal. It only took 49 days to break the previous local top, the fastest time to new highs in the long running, established bull trend.

The two previous periods lasted 206 and 182 days respectively, with price taking 300 days to break the high at the beginning of the trend. A hallmark of trends running of out fuel are those with quicker and quicker new highs until the parabolic thrust to exhaust the trend. Based on this, the end of the trend as a whole is likely not close, but certainly getting closer.

Bitcoin is currently well outside of the long established pitchfork, which has signaled overbought conditions which a pullback shortly thereafter on four previous occasions.

Bitcoin remains within the newly established pitchfork with an upper limit between $1450-$1560 before the SEC COIN ETF deadline. Should the COIN ETF be approved, this upper limit of resistance will likely be easily broken over the medium term. We may see a ‘buy the rumor, sell the news’ situation, with an immediate selloff once the decision becomes public, followed by a grind upwards to new highs in the months to come.

To add to the confluence of a $1450 target, the 1.618 fibonacci extension of the previous move sits at $1445.

A multi-year Inverted Head and Shoulders has a target of $1440.

There is also a Cup and Handle chart pattern on the daily chart, with a conservative measured target of ~$1415. There is a potential throwback to $1100 before reaching this target. Price range expansion at ATH is likely, with lots of volatility.

Medium Term

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 timeframe, all signals are bullish.

However, the best entry signal occurs when signals flip from bearish to bullish or vice versa. Based on the distance of the TK lines, price continues to stay overbought in this range. This is known as a TK disequilibrium or C-Clamp, which suggests the probability of reversal or sideways in price is greater than the probability of continuation. The TK lines also act as support should price reverse at this level.

Short Term

We see a smaller TK disequilibrium on the one hour timeframe. Ideally, price structure for a long re-entry would be similar to that of the last dip into the cloud with a cross-recross of TK lines and kumo breakout.

Conclusion

With China’s previous strength to sway the Bitcoin market largely diminished by the PBoC’s repeated regulatory crackdowns, any immediate announcement out of China is unlikely to affect the price dramatically. Look to Japan, the new market leader in exchange volume, for further news reading exchange regulations, which may affect price substantially.

Network fundamentals are leaning bearish until Segwit is approved due to the current cap on transactions per minute, clogged network, and high fees. Technicals continue to lean heavily bullish with a high probability of $1400 in the next few months, if not weeks. An approval by the SEC of the COIN ETF will help fuel this target quicker and likely much further.