Bitcoin Analysis: Week of Dec 28 (Year in Review)

Note from the Author: Please see (@Tone_LLT) for more timely updates throughout next week on price developments and latest charts.

Last Week’s Review

Last Week we concluded with the following:

Because just 14 months ago the price of a bitcoin was around US$100, the long term chart is still showing tiny signs that a reversal can come any week so we have to remain slightly bullish on that time frame. On the other hand, there is nothing positive to point to technically or fundamentally on a daily level. Demand from people going out and understanding Bitcoin along with buying a few to just to try remains pretty week. The daily price chart reflects this, so as much as we want to say that US$300 will hold the price up, the probabilities are saying otherwise. We are expecting for the price to fall back to US$300 and most likely hit our US$290 target before the start of the new year.

Two scenarios in order of higher probabilities

Bearish: In case the US$290 support breaks, we would be looking for the US$265-275 zone to create a double bottom with the yearly lows and also to match the bubble top of April 2013.

Bullish: There is some room for an immediate bounce right here to take us back to US$340 or even US$355 which is the area of the 50-day moving average. Getting there will most likely present a selling opportunity and only above those levels will we consider looking for additional bullish targets.

We were very bearish headed into this past week and rightly so, as stated in the bullish case, there was a possibility of a small bounce from US$320 to $340 (and perhaps a bit more) but it was to be seen as a selling opportunity. The bounce took us up only to US$335 before the selling resumed. There was one additional bounce on the heals of the Bitcoin Bowl which many like myself were expecting to have some more legs in the move, but even that was not meant to be. At the moment we are almost at the exact same place we were a week ago, but due to the week bounces constantly creating lower highs, last week’s bearish conditions have deteriorated even more.

As usual we will look at the weekly chart, which is the only one left where we can point to some positive signs.

This past week was not as volatile as weeks past, which in normal circumstances is a good sign, but it was the 3rd week in a row where we finished the week lower than when it opened. We are still staying above the downward trend line, though if we are to hit it again before bouncing off, it would have to take place around the US$275 mark. The reason why we say this is our only bright spot is because of the unbelievable 100 times appreciation Bitcoin experienced in 2013, rising from around $13 to a high of over $1200 on Mt. Gox, which was still the dominant exchange at the time.

Because of this massive appreciation, Bitcoin would probably have to fall below US$200 before it would technically be considered as being on a long-term downward trend. Of course that would be very dangerous for the industry so let’s hope it does not come to that. In the meantime, as long as the 2014 low of US$275 holds, we are hopeful for a bounce any moment to maintain the long-term Bullish trend. As you will see later however, the daily charts are painting a completely different picture.

Fundamentals & News

Not that much took place this past week, though as usual we present 3 good round-ups for those too busy to keep up with it all:

This being the holiday, the only major buzz seemed to surround the Bitcoin Bowl. BitPay did a great job with the event and probably for the first time since most of us were kids, we were watching an event for the commercials as much as the event itself. Even the Supper Bowl commercials are loosing their luster, but there is always hope BitPay has some money in the budget to sneak one in there. Not sure how many readers remember the story of, but it sure worked for them about 10 years ago. Now that so many publications are proclaiming Bitcoin to be the worst investment of 2014 or ‘dead’ (Bloomberg, Quartz, Time) an unexpected catalyst is due to arrive in the very near future.

The only other topic worth mentioning is the conversation started by the following article: Coinbase is Tracking How Users Spend Their Bitcoins. To avoid additional controversy let’s begin by saying that everything here is an ‘educated’ opinion, but anyone who needed to read that article to realize the consequences of the convenience of 3rd parties holding your private keys, has to seriously consider taking additional time to learn what Bitcoin is all about. Perhaps even more time than they spent understanding how to use it, and then the first thing they should do is to move their wealth to a safe location which in reality means as far away as possible from Coinbase, Circle, or any company with a US stamp of approval or a potential stamp of approval.

Nothing here should come as a shock to regular readers of this weekly analysis. The United States is the most powerful nation in the world and it is also broke! The world is on the verge of a major transition, but this transition will take time. What gave the United States this massive global dominance is not its military; it was its economy and this is something that has been building for the last 150 years. A lot of people are saying that China is going to take over any day, but it’s not that simple. Perhaps China will one day sit on the Iron Throne, but that will only be achieved as people around the world begin moving their wealth to China for safety reasons.

However, as the world watches the value of the dollar rise, commodity prices like gold and oil fall, and with the United States stock market making new highs almost daily along with physical assets like art and high end real estate through the roof, it should be clear where the wealthy are still looking to move their money to the US. What most don’t realize however, is that the 100+-year Socialist experiment is coming to an end. This is not the first time nor will it be the last, but in the current era it was influenced by Karl Marx and so all these government systems of Fascism, Nazism, Communism, Socialism, and whatever the United States calls itself are all just variations of ‘government knows best’ (or Marxism).

As the Socialist systems in Europe, the United States and its immediate allies like Japan and Canada realize that 90% of their financial promises cannot be met, they will start to look for revenue in places most people cannot even dream about. We will leave it up to