Relentless Negativity is Driving Bitcoin – For the Moment …
This week, the bad news was aggravated by Facebook announcing the pulling of all crypto marketing as a “protective measure” to stop rogue companies involved in scamming via the platform. This has hit the genuine companies badly – and has further decimated the increasingly frail perception of Bitcoin as a viable financial instrument.
The result of this has been the biggest slide in price yet.
Our own worst-case scenario has been pushed lower by the volatility – and we now have to re-examine what could happen next.
Bitcoin falling to “new” lows is nothing new – to give this all some context – take a look at this snapshot of the daily chart, from August 2015 as a comparison to the current situation. At this point in its story – Bitcoin had reached $300 – and had fallen back to $200.
Here, at 1) you can see that Bitcoin fell below our usual 21-day, 55-day, and 100-day EMA support levels. It reached it’s low, of $200, on 25th August, at 2) before gently recovering until breaching the previous support levels (now resistance) at 3) to recover strongly again, at 4).
These EMAs were backed up by the ADX signals in the second panel, at 5). This shows the recovery of the 14-day ADX ( grey line) and the change in negative sentiment, under 2) where the negative 14-day DI (red line) is strongly above the positive 14-day DI (green line). This changes, at 5) when the positive 14-day DI moves strongly back above the negative 14-day DI.
The negative pulse signals, at 6) also become positive – with the price rise – and continue to rise, at 7).
Lastly, the red dot, divergence signal, at 8) indicates a strong change in trend – which is followed through, at 9).
What does this previous experience tell us about the current situation we find ourselves in? Simply, that markets go up and down. We have long spoken of the volatility involved in Bitcoin, and it’s sensitivity to the news – both good and bad. Cryptocurrency is very much an embryonic concept, which has only recently captured the public interest beyond the pioneers, and “crypto-geeks,” who invented it. Most people who invested in them since November have been driven by the percentage returns, rather than the technological knowledge that lies behind digital currencies like Bitcoin. These are longer-term considerations.
They are not the kind of arguments that people holding large losses want to grapple with. The uncertain – and worried newer investors – are running scared … driving the price lower.
Turning to the weekly chart, the heady days of a $20,000 Bitcoin seem very remote.
The fall has been as dramatic as the rise. Bitcoin has hit the 21-day EMA support level now – and is pushing lower, at 2). If it closes below the 21-day EMA, the next line of defense is the 55-day EMA, at 3). This would take Bitcoin to a new low of around $6,000. Of course, the 100-day EMA, at 4) the final strong support level, would see Bitcoin at around $4,000. This is low – but it is far from zero. Any of these levels may represent a new buying opportunity for those who are willing to see further than the immediate gains and losses caused by the flightiness of “investors.”
That Bitcoin has further to fall, is confirmed by the ADX indicator, at 5) with the dip in the 14-day ADX (grey line) being graphically clear, along with the rise of the negative 14-day DI (red line) at 6) which is just rising above the positive 14-day DI (green line) sharply.
The pulse indicator tells it’s own story, the strongly positive, light green pulses being replaced by strongly negative dark green ones, at 7).
Finally, the blue dot, at the top of the divergence indicator, at 8) signals a strong change in sentiment – from positive to negative – and this is borne out by the fall since at 9).
As usual, we need to keep a very close eye on all the signals and indicators, which will give us a timely warning as to what the next moves in Bitcoin might be. Be aware of the support and resistance levels we have pointed out – and be prepared to regroup around them if sentiment changes. We remain positive about Bitcoin into the future.
Right now – the bulls are at war with the bears here – what transpires depends when they decide to fight back … and how hard …
Noble Gold specializes in IRAs and 401(k) rollovers through precious metals and cryptocurrencies investments.
This article was originally posted on FX Empire
