Analytics provided by BBA

As the Bitcoin community celebrates the 2nd successful quadrennial block reward halving, market participants seems less enthusiastic about the event. Economics will trump speculation eventually, but directionless volatility might be here to stay for a bit.

The Bitcoin halving is a seminal and historical event that carries significant meaning for almost everyone involved. It is yet another example of Bitcoin’s monetary predictability, and perfectly juxtaposes the legacy system which has never been good at following through on promises. We now enter a new era of Bitcoin, one in which the economics will shift in dramatic ways and will usher in new dynamics in Bitcoin markets.  

Despite the fact that price has not yet reflected these new realities mainly for technical reasons, they will be priced in eventually as natural market forces go to work. Until then, however, we are stuck trading the market we are given.

Trends and patterns

The daily chart of Bitstamp below is the best view we have of the medium term technicals for bitcoin, and generally speaking things remain relatively bullish. We can see that the $150 - $250 range was the long term accumulation range, $350 – $450 was the initial consolidation range, and now the market is putting in a pennant (aka triangle) formation that tends to be a bullish pattern (secondary consolidation range).

Fibonacci analysis is confirming this hypothesis as support has been seen at the 50%, 61.8%, and 78.6% levels, telling us that buyers remain steadfast in the low $600’s. Also notice that $700 - $775 is a rather substantial resistance area, although volume is saying that it’s not as heavy as would be expected.

Additionally, momentum still looks rather weak with Willy and RSI slowly creeping lower and MACD staying below the centerline, while the 9/18 EMA cross turns bearish once again. Conversely, the A/D line (accumulation/distribution line) remains firmly in an uptrend signaling demand at current levels, and the 200-day SMA is still moving higher.  

Over the near term, if the bullish pennant fails around $620 then we should be looking at sub-$600 in the not too distant future, having said that the medium term outlook continues to favor the bulls.

BTC/USD price chart 1

Bitcoin price: what to expect?

What does the near future hold for the bitcoin price? The 6-hour chart below tells the story all too well. Following the regional highs near $800, price has since pulled back into a trading range between $550 and $775 as gains from the Spring rally are consolidated.

This range has been created by an area of strong historical resistance on the upside and strong demand support on the downside, both of which will be difficult to break through, which makes us think we could be stuck here for quite a while.  

Volume profile looks healthy, the momentum oscillators are flat while the A/D line slowly rises, and support in the form of the medium term uptrend line and 200-period SMA are keeping the market elevated. A breakdown below the ~$620 level would portend lower prices over the next week or two, likely probing back below $600 .  

Despite what could be a choppy and frustrating post-halving digestion period, we think this can be used to reinforce positions for the eventual move out of the current consolidation range. Neutrality and patience will likely be valuable in this environment, although nimble traders might consider a “buy the dips, sell the rips” mentality for the time being.

BTC/USD price chart 2

BullBear Analytics

BullBear Analytics is the longest standing cryptocurrency forecasters in the market. They started in 2010, doing technical reports in, and have evolved into a buzzing community of traders. Adam is BBA’s chief analyst.

Disclaimer: Please always do your own due diligence, and consult your financial advisor. Author owns and trades bitcoins and other financial markets mentioned in this communication. We never provide actual trading recommendations. Trading remains at your own risk. Never invest unless you can afford to lose your entire investment. Please read our full terms of service and disclaimer at the BullBear Analytics Disclaimers & Policies page.