Crypto Market Pullback - Analysis 2 - Bitcoin fork and Bitcoin Cash
It's been a little over a week since my last analysis report and I think it's safe to say that we've seen plenty happening lately in the crypto world, most notably the bitcoin fork. Prior to August 1st, a lot of people were still betting on bitcoin not forking due to the overwhelming majority of miners supporting SegWit. It was this great news that took BTC from the 1800's to upwards of putting the All Time High in reach again. Well, predictably, there was a little pull back right after the fork. Cause for the rally up to near ATH's? We could attribute that to a few factors, but the most impact comes from BTC's moving off of exchanges causing supply to dry up, as well as people looking to buy new BTC's to profit from dual holdings (BTC and BCH).
Dual currencies not only mean a disconnected community, but competition for businesses on which they prefer. Now, I'm actually in favor if a split. Why? If you want bitcoin and crypto currencies to turn in to something larger than just an overhyped store of value, there does need to be some competition which creates stability. This in turn will actually lead to progress and development. In an investment sense, usually this is great news. If a stock splits for example, you now have the same value, but split over more supply. This is beneficial as it allows more investors to come in cheaply. In theory, this should be happening with bitcoin as well....except you don't have double the BTC's, you now have two things which compete with each other.
In any event, we now have buyers splitting their efforts, time and money on an additional currency. This isn't really different than looking at new cryptocurrencies to put funds in, however BTC and BCH are the same product (just like ETC and ETH). This separation is not only splitting the miners of the community, but the buyers and other investors as well. As we've seen in the past, a correction tends to snowball with these markets.
Next item for having the split be a factor toward a market correction is the google trends indications for both "bitcoin" and "bitcoin cash". As seen below, trend searches have peaked already for bitcoin on a 30-day chart. In the past, this has always followed peaks in price. Interestingly enough, this new elevated price search hasn't led to new highs like usual. Instead (depending on charts, but I'm using Coinbase), we've seen lower highs compared to the ATH on June 12. Even with all this boom, hype, and new search interest, BTC fails to rally.
Bitcoin Cash searches haven't done so well themselves either. In the last seven days, "bitcoin cash" searches have already peaked and fallen tremendously (and I'm not even getting into BCH price this review).
Overall, the point I'm getting at is that we've seen interest already peaking and falling. We're seeing lower highs. The most interesting factor is that the bitcoin fork was the biggest news creating hype and interest in the market. Now that things are over and it was super anti-climactic, what else will keep us going? Looking at the longer term charts, things are still incredibly overbought. There's been no new fundamental changes and things are obviously cooling off.
Ultimately, I'm still predicting a long term correction over the next year as BTC corrects down to about the $1,300 level (maybe less now since the supply has doubled). It's difficult to say how the recent split will impact correction price. Either way, this huge growth cannot be sustained unless there's ample market factors.
Thanks for reading, always curious to see opinions on this and agreements/disagreements with my opinions and analysis. What are your thoughts?
Liked you article nice read. ;)
Thanks @dirtyharry30 !
Thanks for the report @exxodus
Although I don't think the BTC price needs a correction down to $1300, I really find your articles insightful. I love the way you're measuring public interest.
Hey @cryptomagic! Thanks for the reply, glad you find them insightful. You are probably right that $1,300 is a lot. A lot of this is just based off of $1,300 being the last big resistance level before the rally. In the past (2013 rally), we corrected down to the support/resistance from the previous ATH....that's how I ended up there. I see BCH leading the way of ETC.
@exxodus agreed. BCH is looking like it'll be closer to ETC than anything else. I'd like to think it fills a gap between LTC and BTC, but only time will tell.
I hear you on the last level of resistance. I think however that we're still due some uplift to the price as it becomes more widely understood. Much of the mainstream media are now running articles on BTC and crypto, so providing more exchanges or services make it accessible to users, we should see a lot more people entering the market.
Services like Steemit go a long way to making cryptocurrency more understandable and less scary to the wider public, so here's to hoping the good message spreads!
There's absolutely more awareness lately. BTC definitely is still marketed the best. I do think that the other cryptos and blockchain projects will see the best growths though and have more functionality. BTC isn't really functional for anything besides payments for gambling or dark web stuff. It's been mostly store of value (for myself included).
What would you target the actual support to be? $1,500? We've already hit $1,800 and I still feel that we will end up breaking that for sure.
Agreed on the marketing. If only the other crypto currencies and projects were getting more coverage! It's a whole new world for all to benefit from.
On support, I'm no trader by a long stretch. I know we need to see more progress, but I think it's on another breakout and will find support at $2200 on the next dip. Again, caveat that I'm not a trader, so just my guesses there.
@exxodus Couldn't have called my comment above any better eh! :)
May we all enjoy more sustainable rises!