It is the most debated topic among crypto enthusiasts:
Will bitcoin go up again or will it stick to its path towards the downside?
The answer is far more simple than most people believe:
No one can tell you what exactly bitcoin is going to do.
But the good news is, we can estimate the chances of both options, bitcoin going up or down.
So let’s take a look both from a technical analysis but also a fundamental point of view.
The history of bitcoin:
Bitcoin had exactly four big rallies:
1. The first one was back in 2011. Bitcoin rose from 0.50$ to 32$. After that, it fell almost 94% back to roughly 2$.
2. The second rally was in 2013. The price went from slightly below 10$ to almost 266$! After that, it fell almost 82% back to 50$.
3. The third rally was in 2014 when BTC’s price soared from 110$ to 1254$ and fell to 135$ afterward and incurred a heavy loss of almost 93%. Many believed that price drop was due to the MtGox exchange hack back then.
4. The fourth rally was the most recent one, which went from 3000$ September 11th to 20.000$ December the 16th. But this one was different. It basically started on first August 2016, when BTC had it’s last bigger correction (>40%) where it fell from 777$ to 466$. Since then, BTC was in a permanent bull run and declined only 70.71% to date. A sign there is still room towards the downside?
What about now? We saw a rise from 5800$ to 6600$ since the most recent rally in July which peaked to 8500$. Are we bullish again? Will we form new highs?
I don’t want to disappoint fellow crypto bulls but I think the answer is:
The descending triangle pattern is the most reliable bearish pattern of technical analysis. The more times the bottom line of the triangle gets touched, the more reliable it gets.
The weekly candle from 13th-19th August is a bullish reversal candle. However, the recent uptrend from 5800$ to 6600$ had really small volume — a bearish sign that bitcoin will not manage to break the resistance at 6600$.
Let’s assume we break it (1H chart):
Let’s take a look at the daily chart:
“Okay okay, we get it! No moon for bitcoin in August.” Have you ever heard of the stock market adage “Sell-in-May”? As the more a market matures, the more it assimilates to the big market cycles. It’s quite normal that a market declines in the summer, but the adage also says: “Remember to come back in September!”
So let’s summarize the technical analysis: There is no reason that bitcoin will gain significantly in price neither August nor in the near future. We will most likely head below 6000$ and break the support line, forming new lows up to 3000$.
What about the fundamentals?
There are many both highly intelligent and/or incredibly high net-worth individuals who are really bullish on BTC in the long run. The bottom line is this: “If you aren’t bullish on the blockchain, you don’t understand it.”
And since cryptocurrencies are the tools to entrench the blockchain into society and bitcoin is the mother of all cryptocurrencies, the bears will end up FOMOing(Fear of missing out) into BTC when it reaches a new ATH (All Time High).
“Hey wait! You are missing the most important part about cryptocurrencies! What’s about decentralization, privacy and withdrawing the power of the banks to the ordinary people?”
Yes, that’s very important reasons why you should be bullish on bitcoin & cryptocurrencies from an ethical point of view. But these characteristics don’t lead to a surge in prices. In fact, it’s important to empower the truly decentralized projects and stop the support of centralized projects. You don’t want to get rich by investing in cryptocurrencies if this leads to a sad future of the humankind. So please study the idea of the original Bitcoin whitepaper and stop promote scaling solutions which tremendously decrease the decentralization and privacy. Furthermore be extremely skeptic towards institutional solutions regarding the scaling difficulties within the blockchain. The Blockchain Trilemma is yet to be solved -bringing decentralization, security, and scalability into conformity. As long as this can’t be solved, the cryptocurrency space can’t go in the original direction of blockchain’s idea from Satoshi Nakamoto, the inventor of bitcoin and is open to being abused by authorities.
So let’s gets back to the Wall-Street wisdom -Why you should re-enter the market in September:
As you might have heard of the CBOE VanEck / SolidX ETF, these guys managed to design an ETF which matches all of the SEC’s previously mentioned criteria:
-The minimum investment is 200.000$ which exclude non accredited investors (protection of retail investor).
-Insurance for theft/loss of the private key.
-Price does not depend on a single exchange.
-Backed by CBOE
-the ETF buys actual BITCOINS, unlike other ETFs.
This is the only serious ETF because it eradicates the arguments which gave the foundation of previous rejections of the ETF attempts by the Winklevoss Twins. Furthermore, it opens the door for institutional money, since the minimum investment is pretty high, the risk of loss of the private key has vanished and there is no need to open an account on a cryptocurrencies exchange.
The decision whether the CBOE/SolidX ETF gets approved or rejected will be held at the 30th of September OR postponed to February (240 days from the date published in the Federal Register).
Although it may be not approved in September, it might be pretty safe to say, that speculation of such approval will lead to at least a small rally in September.
By the time it gets approved, there is no doubt in my mind that this will lead to a tremendous surge in price. Unlike many other events in the crypto verse, it’s not “buy the rumors sell the news” because it actually brings new money into Bitcoin since many accredited investors have shown interest in such a product and the ETF requires an actual buy of Bitcoins which automatically leads to higher demand versus limited supply.
“But wait…. You’re always talking about the ETF. Didn’t the NASDAQ plan to launch a crypto-exchange? Furthermore, didn’t the ICE, the owner of the New York Stock Exchange, say in early August that it planned to launch a company called Bakkt to enable “consumers and institutions to buy, sell, store and spend digital assets on a seamless global network”? Is it correct, that Bakkt is backed by M12, the venture capital firm of Microsoft, Boston Consulting Group, quant trading company Susquehanna International, Starbucks, Fortress Investment Group and the founder of Brevan Howard Asset Management?”
Yes, absolutely. All of this is correct and super bullish for Bitcoin & other cryptocurrencies. However, it is unclear when Bakkt will launch its exchange.
The only thing which was given a date is ICE will initially launch a one-day bitcoin futures contract in November. As far as you might remember, the introduction of futures didn’t lead to an uptrend but rather initiated the bear market back in mid-December. In fact, CME, the world's largest futures exchange, launched its own bitcoin futures contract exactly on the same day Bitcoin reached its summit, roughly 20.000 USD.
To put it in a nutshell, you have all reasons to be extremely bullish on cryptocurrencies in the long run, but I see no fundamental reasons that the price of Bitcoin found its bottom yet. For that reason, I stick to the conclusion of the technical analysis, that the probability to decline further in price is significantly higher than the chance of entering a new bull market.
Apart from this, I experience the overall sentiment too bullish and there haven’t been shaken out all of the wild speculators and so-called “Lambo-Traders” (which refers to people who have nor proper understanding of the technology neither the longterm vision to truly believe in cryptocurrencies and the ideas behind it). People who entered the market because they love the idea to get rich fast needs to resign otherwise I don’t think we are ready for the next bull run!
Having said that, I conclude that this article has come to an end but not the bear market.
My next article might be about the future of altcoins and their potential replacement by security tokens because I sincerely believe that many of these altcoins are highly overvalued and you should exercise extreme caution with buying any of these. Have you ever seen a time where pure ideas received millions of funds for no other reason than faith? If not, I welcome you to the cryptocurrencies altcoin bubble.
If you enjoyed reading this, please like & share and leave a comment, I am open for discussion. Thanks for reading this!
- Legal Disclaimer* — This is not investment advice and I am not a financial advisor. Please invest on your own risk.