Long Term Update: Congestion

chartCongestion occurs when four consecutive bars open or close within the range of a “measuring bar”. A “measuring bar” becomes such when its price range contains the opens or closes of at least three of four subsequent price bars. As i said in one of my old post sideways price movement may be broken into three distinct and definable areas:

  1. Ledges – less than 10 price bars
  2. Congestions – 11-20 price bars
  3. Trading Ranges – 21 bars or more with a breakout usually occurring before the thirtieth bar

Now 13 days are gone without a breakout above or below the “measuring bar” (i consider the bar of last 7 January the measuring bar) and we are in a congestion; I don’t think the market is still following the triangular descending pattern that I mentioned in the previous update.

I expect to see a breakout in the next 5-10 days, unlikely that this congestion will last more then 20 days in a volatile market like this. Top of the congestion rectangle is the first deviation line of VWAP around $930, while the $765 static support just below the VWAP defines the bottom of the trading range.

I think that without a really bad news investors will not sell their precious bitcoins under $750, I believe that the positive sentiment of the market will slowly push prices higher outside the current congestion, possibly above $900 and toward new highs but this process will require some time.




15 thoughts on “Long Term Update: Congestion

  1. Mike

    Excellent analysis. What do you think about the rsi reading in the context of what u said? It seems to show an oversold range but not extreme with room to go further down. Thanks.

    1. Enky

      I’ts mixed, around 50, not much significative and oscillators in general don’t work well during a congestion phase.

  2. Nealio

    Thanks for the update Enky, the stabilisation is interesting

    What affect do you think it would have on the market if the Feds auction off their forfeited 140,000+ bitcoins?

    1. Enky

      they will not sell the coins on open market but by an auction, i don’t expect a crash soon because of that.

    2. Mike

      I think there will be plenty of buyers. It is difficult to buy that many bitcoins in the open market without jacking up the price. This would be a perfect opportunity for any big buyers to make a purchase at a good price without disrupting the market. At an auction the buyers might be able to buy at 50 to 80 cents to a dollar. This transaction will likely show in the localbitcoins market. The price range in this market does not affect the market price. They range from $700 to $1850 at any time.

      1. The sale will definitely drag the price down indirectly especially if the auction ends at $.5 to a dollar. It’s possible that the auction will end up above a dollar to a dollar and this will affect the price positively.

      2. Mike

        Auctions generally go below the market value as bitcoins are not Picassos. but who can tell until it actually happens. We’re all just conjecturing….

      3. If somebody has interest buying 30K BTC, they already know that it’s impossible for them to buy such quantity in a low liquidity market without greatly affecting the price. For example, I went and put a sale order of 30K BTC at Coinbase and the price they gave me was $455 two days ago. I tried putting more than 10K and you will get an error as the market book is too shallow. That’s my rationale that auction price may go above BTC market price. Recently, volumes are ridiculous and you see 50 BTC dragging the price up and down by $10-15 at times!

      4. Andrea Chiavazza

        I think it is true that an auction of a big stash of bitcoins might end up selling at a price higher than at the internet exchanges, for the reasons that Nikolay explained.
        The price of bitcoin in general might go up if you consider the average price of all exchanges, and if you also include in the average the price that has been paid at the auction, that could be considered an exchange site, albeit only for that limited period of time.
        The thing is that the people that bought at the auction might have otherwise bought at an internet exchanges should the auction not have taken place. So the price at the internet exchanges could go down as a result of some buyers buying at the auction instead of buying at the internet exchanges.
        The reasoning so far of course doesn’t take into account the news in itself that the feds have finally decided to sell, which effects would be hard to predict.
        There is another thing to consider though. The feds will not try to sell those bitcoins at the highest possible price as a normal person would do, the same way that the feds are not trying to sell gold ETF at the best possible price every time they dump them on the market. Their intention is to slam down the price of the thing they are selling (aka market manipulation).
        The feds are in the business of printing money and managing the money supply, and naturally what they try to do is to depress the price of any fungible commodity that could be used as money, be it gold or bitcoin. They are quite happy on the other hand to blow the price up of non-fungible assets that can not be used as money, like real estates and the stocks market.
        From their point of view, the best thing they could do to slam down the price of bitcoin would be to sell all the bitcoins in small amounts, for example in lots of 10 or 100 bitcoins. That would effectively drive all buyers out of the internet exchanges and will probably result in a big price drop, albeit only temporarily, as they are bound to run out of bitcoins to sell.

  3. Mike

    Huobi has led this recent rally but mtgox has taken over the leading the pack while bitstamp seems like a reluctant follower falling further behind. It is interesting to see many exchanges trading the same coin with no robotrading to keep things in sync. This is a terrific thesis material for finance and economic phd candidates….

    1. Enky

      I think is the conseguence of amateurs at work.
      3 years are passed and i’m still waiting a decent exchange to pop up.

      1. Mike

        I think it is a matter of time with the barrage of vc interest in bitcoin the last 10 mos. I talked with coinsetter ceo a few times (email) and he is supposedly working putting together NASDAQ caliber exchange but only time will tell. They need to attract high volume traders to provide liquidity on top of some market makers. Personally, i think the bitcoin price needs to go up a lot more so that liquidity opens up through fractional trading. I see 9 digits on right of the dot. Fascinating phenomenon this bitcoin….all we need now is for Amazon.com to get on the bandwagon.

  4. Mike

    Last night, as Enky twittered, Mark Andreson puts out an op-ed piece on a nice summary of what promises bitcoin holds. This morning, Bloomberg puts out an article on bitcoin as a threat to Visa and MC on its frontpage “top news.” This shows once again how bitcoin is hot and its story sells. Ultmately, bitcoin is seen as the new frontier for financial opportunities in ways not seen since the dawn of the Internet….

Comments are closed.