Bitcoin Analysis: Week of Jan 11 (Tough Times)

Note from the Author: Next week’s analysis might be late due to attending the now controversial TNABC in Miami. 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:

It is impossible to say at this moment whether the US$255 low will be it for the year, but it sure does not feel like it. The US$275 low in October had a stronger reversal so most likely we will see lower lows in the very near future. For the time being however, this oversold condition needs to be relieved so a bounce here back to US$300, US$315 (point of the breakdown) and even US$330 (50-day SMA) is the most likely outcome.

Two additional scenarios in order of higher probabilities

Bearish: Since we are looking for a bounce to at least US$300, the move is proven wrong upon visible new lows. Now that we have even established US$260 as a short-term higher low, those looking to pick up bitcoins here have a line in the sand they know proves the reversal false. If new lows are created, then it’s open season on the panic and we can see US$200-225 very quickly. There is really nothing technically stopping the slide right now from reaching much lower levels.  This situation is the result of going straight up from US$85 in October 2013 to over $1,200 just 2 months later.

Bullish: Nothing really bullish to consider. Best-case scenario right now is to reach the 50-day SMA, which is dropping quickly and should be at US$330 in a few days. Unless the Euro Implodes or Amazon & Ebay chose to accept only bitcoins with no conversion into fiat, let’s just hope for some stabilization before dreaming of the Moon.

The rebound took place right on schedule even in spite of the Bitstamp situation. The rebound however, only met the very first target of US$300. It was very disappointing that it was what the entire counter trend move had, but all we can do is analyze the charts and try to gauge the mood of the community. The big question that needs to be answered going into next week is whether the recent low of US$255 will hold or are we in for a major level of hurt.

As usual, we will look at the weekly chart for a long-term picture

We are still sitting right on top of the downward sloping trend line, so until it is breached, we will continue to lean ‘and perhaps pray’ for a reversal in prices any day. The margin of error, however, is incredibly thin. There is almost no support under US$250 and if we start to fall, the selling can really accelerate quickly. George Samman of BTC.sx has written about this possibility earlier this week.

Fundamentals & News

As usual we present 3 good roundups for those too busy to keep up with it all:

The big news this week was of course Bitstamp and the news of the hack that took place compromising their hot wallets. Bitcoin exchanges have seen their share of issues over the years, but in this case, looks like the damage has been minimized.

As usual, the advice here will be the same, anyone who was in a situation where they could have potentially lost more than 15% of their bitcoins, has entrusted a 3rd party with way more bitcoins than they should. This is still a very young industry that just celebrated its 6th birthday, where for the first 3 it was virtually irrelevant.

There are several things to take a way from this incident. Those that trust Bitstamp, will point to the fact that they will now be more secure than ever and news has already came out that Multi-Sig wallets are being implemented for hot storage. On the flip side you can say that it’s time to move your bitcoins to a different exchange or there will be a need for a more secure and professional trading operation if this industry ever intends to entice Wall Street.

In other news that seems to be sweeping the industry, all the controversy surrounding Josh Garza will come to a climax this upcoming weekend at the conference in Miami. By now it is pretty clear that all the statements surrounding PayCoin was just hype and this was mentioned last week as well. Also If the advice here that only 15% of your bitcoin holdings should be put at risk on an exchange, then probably no more than 5% should be diversified into any new altcoin. Bitcoin was no different at any point of its history and anyone who invested more than 5% of their net worth into it, should have also been considered totally insane at the time even if it did work out. It does not matter whether it was at a value of 10 cents or US$1,000, speculative investments should always be comprised in amounts you can afford to lose. Those that did buy Bitcoin at the very top might be disappointed at the moment, but if they followed common sense, they are not financially ruined.

As for what it all means for Bitcoin, well, it’s not good on multiple levels. First it brings negative incidents to the industry and we all know how the Main Stream Media loves to only report on the problems currently in this space. Also projects that mostly require bitcoin holders to buy into them add to sell