Technical Analysis

Medium Term Trend

Updated 17th December 2017

Did Bitcoin just show us its top in a wedge formation??? It looks like a contracting ending diagonal may have finished the Bitcoin’s run. The pattern gets invalid as soon as 21,300 is traded. Very risky setup for trading either way currently. Better to wait for confirmation of what is going on.

Here is the big technical picture again:

Updated 15th December 2017

We repeat our conclusion from December 8th 2017: The Bitcoin is in serious trouble if it does not take out the 18,400 level. Our updated count shows a loss of momentum into the new high in our MACD and RSI indicators. Moreover we have a complete elliott wave count.

The sole alternative is an extension of wave 3, which would mean that we are currently just in wave iii° of 3 instead of our black elliott wave labels in the charts.

Bitcoin is at the moment clearly a dangerous trade from an elliott wave perspective. We project at least a meaningful top in the 17,700-18,100 area.

Updated 8th December 2017

We forecast the bitcoin to reach its top in the 17,500 – 18,000 area. We see one last swing to the upside before the bubble bursts. The arrival of bitcoin futures on the CME could be the trigger as institutional investors can finally take exposure in these instruments.

Our forecast is dead if Bitcoin trades above $18,400. In that case we’re dealing with an extended 3rd wave and have way more upside!

Updated 30th November 2017

Our last forecast was correct in terms of further gains to the upside as well as a different character of the increase. However, we got an even steeper trend to the upside instead of shifting to a lower gear. The green trend channel depicts the trend that the bitcoin is currently following. Our technical analysis from November 13th as well as the fundamental analysis are still valid. The only change is that we expect as of today another wave up until a major top may be forming.

It appears right now that wave 3 is shorter than wave 1. This means that wave 5 should be even shorter than wave 3. Alternatively it may also imply that we haven’t seen all of wave 3. Wave 3 may therefore alternatively extend further to the upside. Our current forecast is that the bitcoin will target 14k next. We’ll analyze the pulse of the market as more wave structure forms. 

Updated 13th November 2017

We are in a breathtaking upward trend since inception of the Bitcoin. The first known transaction took 2010 place. At that time 10,000 bitcoins bought 2 Pizzas. Most progress (we look at it in log terms!) has been made in the period 2012 to 2013 when the Bitcoin went up to $1,200.

The wave development after 2015 looks to have taken on another upward trend, which accelerated in July 2016. This is wave C°, which is probably still active as we publish this market analysis.

As of November 13th 2017 we think that the bitcoin will inflate a little further despite having seen the vast majority of price gains. Our arguments are first of all time and space. Wave (1) and (3) have taken roughly 1.5 and 1 year respectively. Wave (5) would be only 2-months old if already finished. Moreover proportion wise the whole thing also seems to lack the final spices… Wave (3) looks extended with a more than 10-fold increase. Wave (1) still managed to increase 5-fold. We believe that wave (5) should get closer to these time frames and proportions. 

Additionally a cross market look gives the impression that some other cryptocurrencies may be in a 4th wave triangle as they went sideways for the past months. That also supports the case of another leg up for the cryptos.

What we are still missing is a characteristic difference of wave (5). So far it really looks like some extension of wave (4) as they seem to have the same direction, speed, and retracement characteristics. However, the count of the subwaves almost eliminate the case that wave action since September 2017 is an extension to wave (3). Additionally wave (4) records the greatest retrace since 2014. Therefore our verdict is that we are already in wave (5). We suspect that wave (5) will show us its true character in the next weeks. It’ll possibly evolve into something less steep than what we’ve witnessed all through 2017.

In a nutshell: We expect further gains though at slower pace than what lies behind us in 2017!

Fundamental Analysis

The Bitcoin Bubble

The Bitcoin is of particular interest these days. No wonder as it has skyrocketed to USD 17,000 since its appearance.

Cryptocurrencies are in a classic bubble with all ingredients it takes right now. There is a beautifully short and not confirmable story about Satoshi Nakamoto. Like a wraith inventing a new fancy technology… and disappearing in mystery. Of course the technology is new, revolutionary, and will change the world to the better!

The story has been embarked upon with great enthusiasm. It started trending with tech geeks and found its way into classic media. The author of this article can trade Bitcoins at his traditional old school brokerage account nowadays. Of course there is a highlighted symbol for the asset!

What a beautiful hype…

So what are the fundamentals? Well, not nothing but very slim… getting around capital controls, no regulation. Does that justify a price increase from $1 to $17,000 over a decade in absence of serious inflation? No, it doesn’t!

Unstable value

The volatility is magnificent. A loss off 30% and more of its value occurs regularly. It does occur as often as bonds pay coupons! That’s not what is sought after from a currency, is it? There are no dividends, interest, or anything similar benefits for bitcoin holders.

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

Technical Analysis