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The cryptocurrency news cycle was dominated last week by the announcement that Bitfinex was the victim of a theft to the tune of 119,756 BTC. The market continues to struggle with the implications of this event.
Analytics provided by BBA
Drama returned to Bitcoinland last week as Bitfinex was taken for ~120K coins and subsequently the price dropped over $100 on all exchanges.
While it initially looked as if they would be able to resume operations within a few days, it now appears as though they might be down for quite some time. Despite the near term hit to price and the logistical effects of such a shutdown, the longer term damage is to market confidence as has been the case in every instance of exchange hacking. That said, the liquidity pool for Bitcoin is now much larger than it was during the Mt. Gox debacle and many more options exist for traders and investors now. Nevertheless, it will take some time to regain the trust of those who have now been burned by yet another major crypto marketplace.
Moving on to the technicals, we first want to take a look at a 15-minute chart of the price action before and after the hack announcement (via Cryptowat.ch). It has been noted by other analysts that there was bearish price action before the official announcement from Bitfinex, although it looks fairly normal in terms of what we have historically seen in these circumstances. A classic spike down followed by a bullish volume breakout confirmed the low at $465, as did an OBV washout and a MACD divergence. Now we are on the slow and steady climb out of the hole, and until now things have been moving along nicely.
Next up is the ever-important daily chart which has some very interesting features right now. For instance, notice that the spike low came all the way down to tag the lower support range before bounce back above there and the medium term uptrend line. Additionally, the candle bodies at the lows failed to close below the 78.6% Fibonacci retracement level, as well as the bottom of the new pivot zone.
On the other hand, the price is now back at moving average resistance, and is hitting a hole in volume profile so it will be tough to push through this $600 region without a recharge. On that note, momentum and volume are hitting resistance too in the form of the centerlines, while the A/D line presses higher and trading volumes recede again.
All things considered, at least from a technical perspective, the market looks pretty good despite a major exchange being offline. We do not expect new lows in the near future, barring any additional exogenous negative events, although we do think a retest of lower levels is a good possibility in the not too distant future.
Ultimately the longer term bull market remains intact, however, the current consolidation may take even longer to resolve than previously expected now that market sentiment been shaken.
Let’s hope Bitfinex handles this ordeal professionally, and the exchange space learns another lesson in operational security.
BullBear Analytics is the longest standing cryptocurrency forecasters in the market. They started in 2010, doing technical reports in bitcointalk.org, 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.
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