Bitcoin Monthly Outlook – August 2017
Bitcoin prices had another volatile month which saw it end up higher at the close of the month but not by much. Though this would have disappointed the bulls in general, this kind of move was only expected as prices are very near the crucial $3000 price region and as we have been saying many times over, we believe that this region is likely to hold the prices in the short and medium term and what we are seeing is just consolidation from the prices near the range top.
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July was an important month from the point of view of the long term investors and watchers of the bitcoin market as it was the month that the bitcoin prices faced a major challenge but they proved to be strong enough to come out of the challenge with flying colors. The beginning of the month turned out to be a near disaster for bitcoin as prices crashed through on the back of general fears and uncertainty in the market. Ethereum prices had faced a flash crash early in the month and this seemed to affect the entire cryptocurrency market as panic crept in. Though the ethereum prices did recover quickly, there has always been this feeling among the investors and traders in the bitcoin market that the prices of bitcoins are not based on any fundamentals and hence likely to fall anytime.
Panic in the Markets
It is this feeling that began to spread during the first week of July and this led to a crash in the prices of bitcoin and other cyprtocurrencies as well. The prices crashed from above $2600 below $2500 and dropped by around 20% to below the $2000 for a brief period. This was a period that there was total panic in the markets and everyone seemed to want to get out of the bitcoin market. This was also an opportunity for the real investors and long term traders to make their presence felt, pick up the bitcoins and help in bringing in some maturity into the markets which would help in the long term. And they seem to have heard the clarion call as they stepped into the bitcoin market and started buying it which helped the bitcoin market to recover.
The second and third week of July was marked by a strong recovery in the bitcoin prices which showed the world that the blockchain industry and the bitcoin market were here to stay and that it could handle any crash and any correction in a strong manner. It also showed that there was the presence of a large number of big investors as well who are likely to step in at times of need and invest for the long term in the bitcoin market. This has added to the confidence in the blockchain industry and bitcoin market and it is only going to add to the credibility of this market in the long term.
Markets Await the Fork
The last week of July was dominated by the talks and the possibilities of a new kind of development in the bitcoin market which was called the fork. The bitcoin fork came about due to the need to increase the size of the blockchain which will in turn help to increase its transaction capacity. This was to happen in August and there were a couple of different approaches that were proposed for this to happen. For the end users and traders, it meant that the bitcoin has been split into bitcoin and bitcoin cash and they were likely to be faced with a lot of uncertainty. It was possible that many miners would move to bitcoin cash and hence, there is confusion on what will happen to the bitcoin market and its prices. Many brokers and exchanges stopped transactions in bitcoin till the fork will be completed and this creates a lot of uncertainty.
Technically, 2 approaches were put forth, one by the Bitcoin core team which has done the bulk of the work in the bitcoin opensource development and this approach was called segwit while the other method was proposed and supported by large mining pools and this was called the segwit2x approach. The bitcoin mining industry continues to be split on the approach and the effort for each of these technical approaches and still different teams of miners follow different approaches.
The day marked for the bitcoin fork was August 1 and though the worst was expected, the day passed off peacefully and there has not been any major effect on the bitcoin industry so far. As a matter of fact, bitcoin trades steady since the crucial announcement. The full effect may be known only as time progresses as we have to see which teams adopt segwit and which ones support segwit2x and we also have to see who moves to bitcoin cash and who stays with bitcoin. There is still a bit of uncertainty around but so far, the situation has been managed well.
Forecast
Looking ahead to the rest of the month of August, we expect the $3000 price to cap the moves in the bitcoin prices in the short and medium term as well. This price region has assumed ominous proportions and it is going to take a mammoth effort for the bulls to break through this region. Also, there have been 2 failures in July near this price region which means that more and more sells and stop losses are being built in this region which makes it all the more difficult to break. So, expect some consolidation and ranging during the month of August which is likely to keep the prices tightly capped. Pay attention to Bitcoin cash (BCC) development and price action as it could determine Bitcoin (BTC) price.
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This article was originally posted on FX Empire
