Bitcoin Analysis: Week of Nov 16 (Arbitrage)

Note From the Author: Please follow me on Twitter (@Tone_LLT) for additional updates to the state of Bitcoin’s price volatility.

Last Week’s Review

Due to the volatile action of Bitcoin, a special Mid-Week Update was published and in it we concluded with the following:

As we said over the last few weeks, a break of US$420 turns all of our time frames Bullish, but not only was that not expected in one day, it went beyond and even broke one additional level of resistance at US$440. It is never wise to do anything rash either in a crash or in a rally so the current advice to those that dare follow is to do nothing and let things settle. If you already have some bitcoins, which every reader should, just be happy the price is finally going up. If you do not and were waiting for the perfect time, right now is as good as any other if you believe in Blockchain Technology.

What to look for going into the weekend

Bullish: the continuation of momentum with the next levels of resistance at US$500, US$550 (minor since the triangle broke down a while back), $630-650 zone and US$700 for a new recovery highs.

Bearish: Since we have turned Bullish across all time frames, look for pull backs in order to pick up decent entries starting with US$400, US$375-380 and to a lesser extent US$330-350. If the price falls back under US$375 we would have to flip-flop once again from an overall Bullish stance to a Bearish one.

Clearly the primary advice to do nothing and letting things settle was sound advice. The prices have definitely pulled back and appear to have found some support in the US$375-380 zone which is also the level of the 50-day SMA and the point of the breakout that took place Tuesday night in the US (Wednesday morning in Asia).

What the reader should also realize is that these articles will never be timely enough for any reasonable trading advice. When the first sentence was put to paper on the Mid-Week update the price on Bitfinex was around US$450 (over US$470 in the futures market like 796). When it got submitted the price was around US$430 as stated at the end, but when it got published the price had already fallen to US$380. Just something to keep in mind, but we will always do our best to present the weekly state of Bitcoin with an attempt at a little forecasting.

So in a nutshell, what happened last week? Well, other than the massive price move in both directions, absolutely nothing. You can search the web for all the reasons and wild theories, but absolutely nothing fundamentally has changed. In fact when the price hit a low on Saturday of US$370, we were only $10 higher than the price of Bitcoin at publication of last weeks analysis.

In that analysis, this analyst was Bearish on the price expecting a rejection at the 50-day SMA (US$375) and a pull back to at least US$350. Traders with enough weight to move the market however, had other plans and this was explained in the Mid-Week Update and now that the week has ended we can see the results.

The socialization of losses at futures exchanges like 796 were massive and the highest up to this point, as the winners had to compensate for a 2,020 Bitcoin loss by the exchange as the counterparty, leading to 25% of the gains being deducted from winning trades. This concept will be expanded upon in an upcoming article, but just to make something clear, there is nothing inherently wrong with this as long as the traders are aware and I’m sure many would agree that when the other option is for the exchange to become illiquid and shut down, this might be the lesser of two evils.

Looking at the weekly chart, the break of the downward Trend-Line is clear, but the candle that has formed is known as a ‘shooting star’, which is usually not a Bullish sign. You will also notice how this breakout is very different form the one that took place in May because that one closed the week near the highs.

So what is the Long-Term view telling us? It’s saying to be cautiously Bullish. As long as we remain above this trend line everything is looking good long term, but if we fall back bellow US$330, or perhap