12/28/2017 The Market View and Trading Outlook

Bitcoin, what are you doing? I have decided to get back to one of the things I do best aside from dipping my toes into the cold waters of conflict, censorship and hypocrisy that seem ever so present on Steemit.

So what is Bitcoin up to these days? Basically it is in a corrective period that will shake out weak holders and allow us to build some confidence in its current +$10,000 price range. Let’s face it, while we all enjoyed the ride up, each and every one of us was somewhat suspect of its rapid rise, it’s +$15,000 price and were secretly awaiting the next crash. The market is a cyclic beast, therefore it cannot continue in only one direction; there must be losses to accompany the gains. If we step back from the trees to take a look at the forest that lies beyond we will see that in regards to Bitcoin, the falls occur much faster than do the gains. We have been consistently rising in price at an exponential rate since the beginning of the year. We typically have several weeks of accelerated positive price action followed by a few days of extreme selling that can see value plummet 50% or more. At which point we feel that this short term low point is the floor and we buy back in with new confidence and the price shoots up again; wash, rinse repeat.

We have yet to have a long term period of price consolidation to definitively provide us with a floor that we can have confidence in. Ask yourself; what is the lowest possible price BTC could fall too? $13,000, $11,000, $9,000, $5,000? That being my point; at current, the average retail investor lacks confidence in the price. Sure deep down inside, we all hope that BTC will be $1,000,000 per coin by 2020, but few of us have the stomach to digest the rapid crashes in price or the confidence to purchase more at the moment. That is what bear markets and corrections are actually about; while they suck badly for some (those that bought at the peak and sold at the trough) they are a confidence building part of the equation. They help to establish a solid lower price range (foundation) from which we can build our way towards higher future gains. Once retail investors feel as though we have reached a somewhat definitive bottom they will begin purchasing again and positive price action will be the result.

To that end, there is never a guarantee that an asset will go back up and either equal its previous highs much less exceed them. The market has changed and it has done so in quite spectacular fashion. We now have Bitcoin Cash acting as a direct competitor to Bitcoin Core. Looking at these two assets from a purely objective perspective I am failing to find the benefit of BTC over BCH except name recognition and more decentralization. BCH is faster, cheaper, can handle more transactions and is essentially technologically superior to BTC in every way. The main drawback to BCH from the viewpoint of Bitcoin Core enthusiasts is that it lacks the same level of decentralization and could theoretically be susceptible to a double spend attack by a miner with 51% or more of the mining power at their disposal. I have covered this before and find that to be an unlikely scenario as I fail to see the long term benefit for a miner to create mass panic and crash the very asset which makes them profitable. Perhaps it could happen, but I find it to be a doubtful eventuality.

My tendency to be cynical also leads me to believe that as BCH is superior in terms of scalability, costs etc. that BTC may experience further losses in the future. Big money may see an opportunity to turn BCC into BTC and they have the horsepower to accomplish it. They may see the current $2400 price of BCC as a very discounted BTC and begin to buy it up to the point that it passes BTC and essentially becomes the one and only “Bitcoin”. What’s better than making 400 percent on your investment once a year? Doing it twice. Ask yourself, what is stopping BCH from becoming taking the lead? The answer is perception, an attribute or view point that changes with time. If you remove the perception that BCH is inferior to BTC as it does not currently have the same market share and instead look at it as a technologically superior product that serves the same purpose, it them becomes a very, very discounted and underpriced BTC that may present a buying opportunity.

This is all theory of course, and the loyalists may continue to prop BTC up for quite some while. However without significant changes to increase its speed and reduce its transaction costs it is eventually lose favor and be replaced by a product that has addressed those issues. I think @aussieninja commented on a post the other day that he paid $30.00 to send $200 in BTC from Coinbase to Bittrex. That to me is ridiculous, anytime an asset loses in excess of 10 percent of its value by simply moving it there are serious problems that need to be addressed.

Lecture over, and one to the point BTC price action and the market.

Looking at the 2hr MACD, we are still below the 0 line, but not as far below the 0 as we were prior to the start of the last 2hr positive histogram (buying session). Looking at the MACD/signal line there is little divergence for this time frame indicating a market that is somewhat in balance. It also appears as if sellers are temporarily losing momentum, we have entered oversold according to the RSI and may experience mild gains this evening. This is certainly not a guarantee of positive news for this afternoon as we are far from out of the woods in the longer time frames. Basically expect spurts of slow steady gains over a period of hours, followed by quick snaps lasting a few minutes that wipe them from the table. The telling point will be if these downward snaps exceed the previous lows. It's going to be a grind back the the top that is for sure.

Moving to the daily chart things are a bit more bearish, instead of closing out the most recent selling period it has been extended as a result of the selling that occurred during the early morning hours. We are oversold which is indicative that price will eventually find its way back up. There is divergence to the downside MACD/Signal meaning we may again seem some short term price action toward $14,500 or $15,000 before falling again. $16,000 is the 21 day moving average on my chart and will likely serve as resistance for the time being, we may see ventures above it but we need a few solid days that actually close above this price to signal a correction is in the works. Do not be surprised to see BTC test the $13,000 lower at least one more time. $10,000 has proven itself to be a worthy adversary for bears and I suspect it should hold.

The weekly chart puts us on the edge of bear territory, and predicts a sustained period of sideways trading, ranging behavior and little chance for new highs until well into the new year. I would “guess” that we can expect 2 to 3 more weeks of this weird wounded animal limping along behavior that price action is currently exhibiting. BTC is a trade to me, not a hoDLe. Pick dips on the smaller time frames and watch the longer time frames for supporting moves the follow the trend of the smaller time frames. Play the 2 or 4 hour time frames, buy green, sell at the first or second solid on the histogram if you fail to see market conviction for upward gains.

Ethereum and Litecoin.

I am not today going to differentiate the two as I can cover sentiment towards both in one paragraph. Neither of these is a buy to me at the moment, as both are tied to BTC price action which is itself uncertain. I would venture to say that LTC is the safer long term buy at its current price based upon it being 41 percent off of its all time high of $420. I stated in a previous analysis when LTC was ranging from $300-$350 that it was likely going to settle around $225-$250 and consolidate there for a period of days or weeks before making any significant progress higher. Ethereum, to volatile for me at the current +740 price, I see plenty downside potential to the mid $600s or lower. I am going to wait this one out and see where it decided to consolidate and create a floor.

Previous Analysis:

https://steemit.com/bitcoin/@pawsdog/12-24-2017-the-market-view-and-trading-outlook

https://steemit.com/bitcoin/@pawsdog/12-19-2017-the-market-view-and-trading-outlook

https://steemit.com/bitcoin/@pawsdog/12-17-2017-the-market-view-and-trading-outlook

https://steemit.com/bitcoin/@pawsdog/12-15-2017-the-market-view-and-trading-outlook

https://steemit.com/bitcoin/@pawsdog/12-12-2017-the-market-view-and-trading-outlook

https://steemit.com/bitcoin/@pawsdog/12-11-2017-the-market-view-and-trading-outlook