Long Term Update: daily chart @bitstamp

chartThis is the daily chart since November when the strong rally started . Again the VWAP average acted as important support during the strong drop from the secondary top ($980) of the first rebounce ($542->$980) .  Today BTC/USD reacted a bit from the VWAP after the yesterday low of $612.

I think that now we are at a critical turning point, if the market continues to fall below the VWAP then it is a strong confirmation that a new bear market has probably started, with a final bottom around $250-300 in February or March 2014.

At the moment BTC/USD  is still holding above the midpoint ($ 650) of the last rally and the daily RSI is again oversold, there is also a small RSI bullish divergence with the bottom of last December 7, all elements that let me think of the possibility to see a reaction up to $780-$800 as long as it stays above the support area ($630-$650).

The trade that I opened yesterday at $ 676 is very risky, it could also end up with a substantial loss if the market is going to break decisively the VWAP around $630. If you are averse to taking big risks I advise you to stay out from the market at the moment till it will finally decide which direction to take.

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43 thoughts on “Long Term Update: daily chart @bitstamp

  1. Jukka Santala

    Wanted to ask for a while is there a specific trick or strategy to your choice of time-step for RSI? Around when you first introduced it in detail here, you were using 15 mins, all the recent ones have been at 1 hour, and now we’re at daily RSI. For example http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:relative_strength_index_rsi gives good detail on RSI, but even it doesn’t touch the issue of what time-scale one should be looking.

    I suppose one could look at every major increment before making a decision, but especially with SierraCharts that’s pretty slow, not to mention there’s no limit to the possible increments/step lengths one can use. Another one, for those who are only following the charts on this blog is that the RSI isn’t static;the current RSI will keep swaying wildly, so that especially at longer time-periods it’s impossible to call exactly when the crossing happens. Ie. at 1 hour chart you can be sure that a sell or buy signal happened only 1 hour after the fact, when it can be too late. This is, I’m sure, where experience comes into play but I’ve been wondering if you could share any tips on your method.

    1. Enky

      Time Steps used depend from the kind of operativity you want to do but keep i mind that faster timeframes usually have higher level of noise that can increase the number of false signals. I think that H1 it’s a good compromise (in terms of lag/reliability for the rsi)for speculating in this market, and M15 can help you in refining the entry point. For the vwap there is no difference, it is independent from the time frame used.
      i could use M15 for the blog short term trading, but it would be too fast and i haven’t the time to post more frequent updates.
      The rsi cross happens during the bar, you can wait the end of the bar and check the last value if it is above or below thresold, at that point the signal is confirmed, to conclude you have to wait the open of the new bar but in this case (daily chart) depends from the timezone used, because bitcoin is international and exchanges are always open 24/7 when i’ve a new daily bar not necessarily you have a new bar, you have to wait midnight of your timezone. When i publish a daily chart here on the blog it is always related to my time zone (gmt+1) the calculation that sierrachart does so there could be differences with other timezones but i think it is a marginal issue, not so important.

  2. Mike

    Enky,
    Enjoyed reading your analysis on the daily chart to get a larger perspective. Whatever moves u to post these chart analyses, I find it to be an act of kindness. Anyway, whats interesting to me is that with no formal market makers in the bitcoin exchanges, one is left with a clear sense that there is order and conventions that are heeded in these charts. I personally find Bitcoin is one of the most interesting and lucrative trading vehicles which I’m sure I’m not alone in thinking. Let’s see how the chart – ie, the collective mindset of the traders – pans out with, I’m sure more news to shape it.

    All in all, the volume in the current fall is probably a necessary and I might add healthy shake for bitcoin. With regard to this supposedly survey of Americans on bitcoin, I find that 40+ % very surprisingly high and makes me doubt the robustness of that survey design.

    1. Enky

      Thank you Mike, i think that this market is comparable to how it was Wall Street around 1920,when there was many small speculators and less institutionals providing liquidity compared to today markets; the high volatility here is the conseguence of the lack of liquidity among bitcoin exchanges and their total lack of market makers.
      I agree with you that a shakeout is healthy but i’d like to avoid a bear market like the one seen in 2011 (from $32 to $2 in 5 months)

      1. Mike

        Enky,
        I was not around to witness the bear market you are referring to but that sounds brutal. I’m sure that left many with a bitter taste in their mouths uttering “never again.” The ebb and flow appears to be the natural cycles of life and markets, cleaning up the shores as if nothing had happened. There is little doubt that there was too much froth in the chart that topped in the 12 hundreds …. and I think the last two drops were needed for some stabilization of the chart. While I think the China news is significant, serious players in the bitcoin space sees it as a relatively minor news in the context of what may be in store in the coming years. As an aside, as money begins to leave the stock market with the winding down of Fed’s QE, some of that will find their way to alternative markets such as bitcoin… just mho. As I type this, the chart is trying to decide to retest 650 or 800 areas… good luck with your trade.

      2. Jukka Santala

        Mike, According to http://bitcoincharts.com/charts/volumepie/ btcnCNY/CNY are almost 50% of BTC overall trade volume, as such the last two drops have been only sufficient to account for the expected near-loss of 50% trade volume in linear fashion. In no way do they seem to represent stabilization or actual price correction, IMO of course.
        In addition China has been important twin-pole to Bitcoin’s world-conquest, promising true universality (or perhaps more correctly non-nationality). If you look at that chart again, without CNY it will be bound to USD, rising and falling with it. I think the significance of the Chinese decisions is being underestimated if anything, but then it could go either way as Enkil says. It certainly has momentum and the Chinese events give it publicity if nothing else, better yet if it manages to thrive despite apparent Chinese crackdown.
        But then as noted, the significance of Bitcoin as true currency is also constantly being diminished. As a currency in which transfers take a hour at minimum to clear, that requires environmentally disastrous ever-growing resources to maintain and requires massive computing-power not available on mobile phones just to make payments in without using a go-between, and no way to recover if stolen or lost it’s a challenging and cumbersome currency to use in the first place. It’s probably just a question of time when the exchanges mint their own centralized virtual currency with an exchange rate to BTC to use for day-to-day transactions, leaving BTC as the “gold standard” at least in the short-term.

  3. Andrea Chiavazza

    Am I the only one thinking that if the QE tapering starts and the stock market goes bearish we will have to fasten our seat belts on the bitcoin front ?

      1. Andrea Chiavazza

        There is not a schedule for QE. What happens is the Federal Open Market Commette meet 8 times a year and they decide whether to keep the QE as it is (currently $85bln/month), or increase/decrease it. One of this meeting is being held today and the decision will be announced tomorrow.
        Our global economy is all depending on this QE. A free market and price discovery mechanisms no longer exist. It is all about price manipulations, artificially inflated prices in the stock market and real estates bubbles, austerity measures for the people while at the same time 0% rate easy money given to Wall Street speculators. This is incredible, it should be ended, and should make everybody feel outraged.
        Ludwig Von Mises and the Austrian School of economics explained what is the only possible outcome of a system based on fiat currency a long time ago but unfortunately politicians decided to ignore them.
        End the Fed. Buy gold, silver and bitcoin.

  4. Mendzio

    Hello Enky.
    If I understood correctly, if the bitcoin price fall below the support area, there will be no hope to come back to the last “top” price until march? Will it be safer to sell my bitcoins when the price will drop below support area?
    And thank you Enky, for all your altruistic work on that blog. You have nothing from it, but you are still doing it. Thats something realy outstanding on the world nowadays.

    1. Enky

      if you are in for the long haul, don’t sell, just buy more at every important low. For now it is holding well, let see next days.

      1. Noob

        “It may be noted that the next top might reach the $3600 price level, just above the current forecast that gives us the second deviation line of the linear regression, a perfect top in a buying climax situation which usually creates the market condition for a rapid fall in the price.”

        I’m wondering, what exactly is “long haul”? Is it a year, five years?
        I hope you are as wrong about $200 as you were about $3600. You only write about the price, as if news don’t affect the price at all. Now I know that this analysis is pretty much useless.

      2. aidsman

        Combine TA with news and you can make money in this market.

        Enky has been selflessly writing this stuff for a long time now. It’s impossible to be right all the time, and I have disagreed some times, but his track record is rather good, and more importantly he explains his process so we can learn some things, unlike most of the others who are only writing publicly in the hope of influencing the market.

  5. Jukka Santala

    Might be more panic sells on the horizon though, MtGox resistance at 700 which held yesterday when Bitstamp fell to 612.51 broke down two hours ago when someone made about 1500 BTC market-price sell near it, and it’s still not recovered. A similar size sale will bring MtGox to 675 or below, and the 1 hour RSI has not yet turned up, with 2 hour and higher RSI coming shortly home to roost. Bitstamp’s resistance seems much more fluid… and okay, I need to type faster, or earlier, 700 was just briefly broken so lets just see what happens.

  6. Only the amateurs and people who dont understand bitcoin will sell and SHOULD.. we dont need people that get scared and sell there coins because of a drop.. its all part of the design.. the people who hold the most coins are the creators which by now have millions of coins and this design is implemented to get everyone involved and using it and the people at the top can start manipulating the game.. basically price starts low and and everyone starts getting excited and getting involved with buying and trading.. and then the big players manipulate the market with there buy and sell orders that are bogus and boom price drops the kids get scared and sell for dollars and then the smart ones come in and buy all at very low rates.. Then manipulate again and next thing you know we are at 10k a coin.. I expect the value to be around 3600 per coin a little after christmas.. Use your head people this is a digital masterpiece by design.. the price will go up up up regardless.. drops will occur when they choose and increase at there will.. watch and learn kiddos! 😉

  7. Steve

    Was that last drop market manipulation? All of a sudden there was a heavy shorting on BTC-E at about 11:01pm EST for no apparent reason and volume was low before that.

    1. The two week shutdown of the US Federal Government in October 2013 over a debt ceiling dispute did little to boost faith in government-backed money, especially the one acting as the world’s reserve currency. Every time the word ‘default’ is even mentioned in this context, no matter what the expected outcome, eyes begin to search for alternative assets.

      There have been other alternate theories, including the one that bitcoin value is being driven up by the unfortunate millions desperately acquiring the currency to rid themselves of CryptoLocker malware.

      Also ..

      The renaissance of the medieval period is commonly thought of as an artistic and architectural movement, but in fact wealthy patrons supported all manner of scholars, creators and scientists too. Profit motive was not the goal, but occasionally the result, and great works were achieved which remain unsurpassed to this day.

      I think that’s what we’re looking at here: a conflux of wildly improbable things that gives the world better money, while putting a staggering amount of value in the hands of fervent early adopters and crowdfunders.

  8. I panic-sold just now. Lost $400 in value after buying mostly around $900-$1100 range and then smaller buys in the last week or two around $700s. My feeling is that if the price can’t even rebound from where it’s at, we’ve headed into a bearish market like you’ve said. I’d like to be in for the long haul but I’d rather buy in again after it bottoms out rather than waiting for 6 months for it to get back to around $1000. I might regret this but I think I’d regret it much more if I held on to my bitcoins and saw the price collapse even further.

    1. The price only drops due to idiots selling because they are scared.. best part for people like me is now I can buy even more coins for even cheaper and after christmas when it hits about 3600 I will be sitting on a beach drinking mai tais and smoking a fat spliff! People still dont understand the situation of Bitcoin. This is all part of the master design in which to make people that understand it very wealthy and the people who jump in and jump out broke as hell.. To each his own! Trust me 1700btc in wallet and the value has dropped drastically but wont touch them.. I dont even watch them because its pointless.. Just hold them and await your profit!

      1. I want to go back in again, I really believe in the potential of bitcoin, but I feel like it’s going to get worse before it gets better, and with limited funds I’d rather have more bitcoins in my wallet when it hits 3600 than less. I’m risking that I’ll know when to buy at the bottom of this crash.

      2. Enky

        it is called investing, an unknow word in this community, most try to speculate and don’t have the patience to wait.

      3. Thanks for the response. I have followed your blog for a while and you’ve helped me understand the market much better than any other source of info on bitcoin.

        I thought you said in a earlier post that if bitcoin doesn’t hold around $600 that means the VWAP isn’t providing the needed resistance and we could be facing an overall bearish market for the next few months?

      4. Enky

        could be, if the next rebounce will fail to move above 630$ then the bear case scenario is confirmed. for now i don’t close my trade, daily rsi is close to zero and i don’t sell when there is panic selling, not a smart move.

    2. I’ll be try to be smarter in the future 😛 I don’t know if my nerves are cut out for this. It’s funny, I started getting interested in bitcoin because of the technology aspect and wanted to buy some to support its growth but with the recent price surges I’ve gotten sucked into the speculation aspect and its a new environment for me, not one that I like too much. Cheers anyway, thanks again for the perspectives! 🙂

  9. Just put in what you can afford to lose.. dont think about fuck what if I lose it all.. I am calm as can be just wait for all these big timers and the facebook winklevoss spread it through the media and spread it all around.. let the big players spend and start markets and build revenue.. Do you think the people who just bought 500btc @ 860 a coin woulda bought at that high of a price if it was just going to lose? What bout the twins again they have 1% of all btc.. they are determined to push this to the top and it will I can assure you.. these big timers know what is going on and possibly controlling the prices at will.. this is to be spread globally and watch and you shall see.. Patience is a virtue!

    1. Ami

      Limitless, sadly there are also the real big timers – the bank owners – the most richest people on planet earth and i can tell you for sure that they have so much to loose that they will do anything it takes to prevent bitcoins from getting spread online, those pepole are stronger then the president and all there friends are sitting in the congress.
      I hope i’m wrong but time will tell…

  10. Jan

    Dear Enky,

    First of all, thank you very much for this blog. I’ve thoroughly enjoyed it. I’ve done mostly bad trades and lost money with BTC, but it’s a learning process, and lessons can be expensive. I’m now reading Trading for a Living by A. Elder and I’m interested in becoming a better trader.

    What resources would you recommend for someone wishing to learn more about technical analysis and trading in general? Books, seminars, courses, blogs..?

    Yours,
    Jan

    1. Enky

      I know that book, not bad but you could read also all the books of joe ross, especially “the ross hook”. Joe Ross is a trader and investor with more then 50 years of experience.

  11. Jukka Santala

    The price difference between BTCChina and MtGox has stretched to around 150 dollars (fluctuating of course), this means just by arbitrage people could make nearly 50% profits. Main restriction right now is since Bitcoin transactions take at least 1 hour to clear and 2 might even be needed for arbitrage there is a high risk the price falls further before the sale. But this shows BTC China is pretty much being drained clean, and has failed to procure alternative means for investors/speculators to finance their trading there. This suggests the drop may continue until BTC China is dry of Bitcoins and/or closes shop, and the short-term bottom will be closer to 300 than 700.
    On the bright side the great unknown of China has now pretty much played out, which means that going forward there will be much less risk in Bitcoin for a while. Other countries will doubtlessly keep slapping taxes and regulations on it, but nothing as drastic and significant as China’s move. The current price is also much more healthy; as commented earlier, given the expectation of almost complete removal of Chinese market 1250 * 0.54 = 675 would be price adjusted for loss of market volume and demand, not counting the damage to Bitcoin’s reputation and international appeal.
    If in addition we assume that 1250 was overshot and should have adjusted to about half for healthy market, then 335 dollars (MtGox) is what we could expecect as fair price. China has nearly reached that value, so I guess some Chinese have made the same math. Of course market prices do not stay still, we might consider Bitcoin’s fair price already having risen due to removal of most of the Chinese risk, the speculative appeal of the volatility, and the continuing hype in USA. Likewise we could consider it to have lessened due to the current USA-centricity, the reduced appeal as long-term investment or medium of monetary exchange due to the volatility etc.
    If we’re headed to 350 dollars bottom in January-February and rise after that, then I would consider that very healthy correction and promise for long-term investment. Though while I do not want to instill further panic in people, it’s worth pointing out there’s technically no limit to how low Bitcoin can go, and the psychological effect of low figures are hard to under-estimate. But I guess at low enough point it’s going to start to look like a good investment again.

    No charts were consulted for giving this opinion 🙂

  12. Mendzio

    Im so sad that i dont have free cash right now 😦
    But there will be other occasions! 😀
    And about the bank owners – bitcoin is one of the weapons which can defeat them and im sure that they will react. Thats why im not very optimistic about this discussion of Switzerland’s bankers, financists and politicians about the legal status of bitcoin 😀
    But in bitcoin we trust!

  13. Hi Enky,
    First thanks for all your posts 🙂
    There is something I don’t understand regarding your last trade
    when, a few hours ago, it started to seriously going down under the important level of $650, if I understand they were big chances that we could not expect a rebounce before the next deviation line. So why didn’t you sell at the moment (accepting relative losts), wait to see how would the market react at the -1 deviation line and probably rebuy bitcoins then.

  14. None of you still dont understand.. There is no fucking point to look at a graph and spend timeless hours trying to guess and map it out.. Its not in anybodys hands but the satoshi group who has millions of bitcoins.. they are the ones controlling the buy and sell prices.. it is still not 100% global yet.. they are building up.. now that prices are 3-500 per btc it will allow new adopters to buy in and then spread the word of bitcoin even more.. the fact of the matter is.. spread the word bitcoin in your town and city .. everywhre.. print fliers and stickers and make it where everywhere you look you see the word bitcoin.. trust me.. once it is without a doubt mainstream prices will be 10-20k per bitcoin within a year or two.. I am already estimating about 3600 per btc a little after christmas.. Just hold your coins and buy buy while these suckers who are scared and sell for low.. listen or dont but its a highly advanced program designed to rise rise rise.. call it scam, ponzi, pyramid.. the point is its about going up and up.. these price drops are on purpose.. its all part of the master plan and if you idiots still can grasp then get the hell out and sell all your coins to me for whatever you want.. seriously any of you scared right now I will buy your coins for double what the market value is.. that is how confident of this scheme.. I have over 2k BTC and havent sold one.. now wouldnt I sell if I thought it was going down hill? Would the twins sell if they thought they were going to lose there millions.. NO NO because they know what I know and what the big timers know.. its being controlled and the master plan is coming into effect.. you people have not a clue about what is about to happen within the next few months.. for those of you who have been holding strong and hoarding.. YOUR GENIUS.. stick to that! For you idiots scared that its going to crash by all these people on forums scaring people into saying its dead.. LOL @ them and you.. No offense.. You have to be in this for the LONG HAUL.. its not about the short return.. its about the JACKPOT coming soon. Have faith.. have balls.. HAVE PATIENCE!! seriously I will buy anybody out right now for double the market value.. not just a few coins though I’m talking 20-500 I will do a buy all.. come after christmas they will be 3600+ guaranteed and I will still not sell.. Its a freaking design meant to do this.. if you all still dont undrstand what this bitcoin was designed to do then you are lost in the world and need to go get some more meaningless USD and feel safe.. LMAO

      1. If you all you think is pennies you get pennies.. when you think dollars you get dollars.. but when you think MILLIONS.. you get MILLIONS 😉

        Thoughts become things my friend.. use them wisely 😉

    1. Mike

      Your passion is what it is. Whether that reflects what the btcoin price will do is another matter altogether. If there is a million of like-minded traders out there, no one can deny the possibility of an irrational exuberance. Lol.

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