Technical Analysis

Updated 8th March 2018

We remain with our bearish interpretation of the Bitcoin. The leading diagonal Southbound is most likely.  We witness broad-based confirmation in form of selloffs in the entire cryptocurrency complex. The whole case gets confirmed by bearish fundamentals such as regulation and taxing. Moreover, sentiment tipped most likely over. The stories that we hear as a justification for the investment decision went from a technical revolution to pure greed to being afraid to miss out and arrived now at fight the establishment.

There is nothing wrong with investing in cryptocurrencies and there is nothing wrong with being wrong. However, we strongly encourage again to risk only as much as can be afforded in case of a total wipeout. We may be wrong and it will not for the first nor the last time. The adoption of stop/loss levels is very helpful in this business!

We could be wrong as minor wave 4 could extend to the upside. An immediate rally from current levels leading to a break of 11,750 makes this alternative scenario most likely.

Even a 4th wave extension to the upside is not going to change our interpretation immediately. We would carefully reconsider our view if the same move happens in a bunch of important altcoins. The same move means that they take off to the upside and perpetuate a 3-wave corrective move on the charts right now. 

Updated 22nd February 2018

The short-term Bitcoin Elliott wave structure counts best as a 3-wave correction. It roots at the Dec. 17th high and corrects to the downside. This pattern here implies on a standalone basis a high odds case for followthrough to another all-time high.

However, a bird’s eye view over the entire crypto space tells a very different story. Further upside seems for most of the major altcoins unlikely. The technical picture given here on our January 2018 update is on the way of getting confirmation.

Moreover, the Bitcoin’s rebound off the February 2018 low counts as a 3-wave move to the upside as we publish this. We therefore assign the highest odds to a leading diagonal pattern for the Bitcoin. The target is below $4,000 for this structure.

Our case here is severely weakened if 11,750 gets crossed to the upside. This price action makes a new higher high most likely.

Updated 21st January 2018

Bitcoin is in serious trouble if it gets below the 11,025 level within the current wave. It counts then most probably as a 3rd of 3rd Elliott wave. These are usually very strong. Moreover, wave action is confirmed broad-based by other major cryptos. 11,025 is likely to be taken out and this is market action calling to seek shelter!

Etherum shows a clear 5 Elliott wave pattern to the downside. It was retraced by a zig-zag, which ended just short of the 61.8% Fibonacci retracement. This is a typical level for 2nd waves to end.

Moreover, wave action already cut into wave 1 (blue horizontal line) of higher degree, which signals that the paramount trend to the upside finished at the recent all-time high.

Etherum is therefore also most likely in a 3rd Elliott wave to the downside. 

Bitcoin Cash most likely counts as a 3rd of an intermediate (C) Elliott wave to the downside. Those are also usually very strong. This wave action was preceded by a B-Wave, which retraced a 50% Fibonacci relationship in 3-waves. It counts as a double zig-zag and corrected the first part of a triangle thrust to the downside.

Past month wave action puts BCH in the most optimistic case into a leading expanding diagonal to the upside, which completed just 3 out of 5 waves to the upside. 580 is the target for the optimistic case. The other interpretation, which we favor, is a terminal correction in BCH. The target is here well below 180.

Fundamental Analysis

Published 26th September 2017 & amended 28th February 2018

Cryptocurrencies are in a classic bubble with all ingredients it takes right now. There is almost no fundamental value in cryptocurrencies. There are no dividends, interest, or anything similar benefits for bitcoin holders. The only fundamental benefit is to simplify payment processes for illegal activities.

Cryptocurrencies have an excessively unstable value. They are not suited at all as a mean of payment. Currency is an awfully displaced name for these instruments. We are dealing here with the purest form of speculation that the broad public encounters most likely just once in their lifetime.

Wikipedia has counted something around 1,400 altcoins around year end 2017. The mechanics of many of these instruments are exactly the same that are found in already well-known penny stock scams: The issuer is the only person long (he/she can sell) the instrument and satisfies demand from buyers. It is quite obvious that a short squeeze must occur. The bucket will be pulled further and further away from the buyer resulting in price gains. Moreover, prominent supporters are hired to „consult“ these ICO’s in return for coins. These alleged experts use their public standing to animate the broad public to invest in their supported projects. They provide short stories on how great their promoted product is. There are extraordinary similarities to a Ponzi system. It breaks down quickly as confidence erodes.

It is therefore crucial to question the statements of these experts: Why is the ICO great? What’s its use in the next two years? Is it going to create positive changes for enough people in society? What are the underlying facts to the claims?

The question is not whether the Bitcoin is a bubble but rather when will the Bitcoin bubble burst!

Technical Analysis