Long Term Update: Shakeout or A Warning of Something Bigger?

Something happened last Sunday around 15:30 GMT however and changed things a bit, an approximate 30$ drop in the XBT/USD in about 5 minutes followed by 60$ rally back up in the late afternoon.  Supposedly this drop had to do probably with a single investor having fun at bitstamp, during the recovery from $275 bottom we have seen a nice 30k bitcoins wall in the order book.  Whatever it was, bitcoin approached very closely the april 2013 bottom at $266 without breaking it.

If Sunday’s lows are broken this week or the next one, then traders should reassess their outlook and give more credence to that sell-off Sunday being a warning sign rather than a shakeout. I can’t not forget that this market is spending a lot of time below my long term averages:

  1. The weekly ALMA moving average i use on the weekly chart, now at $440
  2. The 50 and 200 days moving average i use on the daily chart, respectively at $440 and $520
  3. The 1 year long term VWAP, now stable at $515

As long as it stays below these long term reference levels i can’t be bullish, for this week and the next one this market might rebounce up to the first negative deviation line of the 1 year VWAP, as illustrated below the level is at $370. Once reached this level i expect the drop to resume.
I included also a net volume lecture of btc china exchange, it represents the weekly moving average of the difference between volume made on an uptick less volume made on a downtick thus giving us the buying or selling pressure; pressure that is now positive; at least at btcchina exchange traders are buying at these prices.

I can speculate that the final bottom could be just above $200, why? well the drop started in June is now 18 weeks old and most of the time a price movement doesn’t exceed 25-30 bars or weeks in this case.  Assuming another 8 weeks of falling prices (2 months) as a target i’ve the $200-$220 price area, using in the computation the current level of volatility.

To conclude i think that is very unlikely to see bitcoin going under $200 by the end of the year and before opening a new long term trade i need this market to react enough to turn positive again my weekly moving average.

chart
Chart from Sierra Chart trading platform, Courtesy of Sierrachart, Inc.

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67 thoughts on “Long Term Update: Shakeout or A Warning of Something Bigger?

  1. vanen

    mmhhh… i’ll probably sell at 350/360 then, the 275$ happenned while i was not paying attention so i missed it… i won’t miss the bottom this time

      1. Andre

        so, if this comparison is true and I look at https://www.bullionvault.com/gold-price-chart.do I would expect to be at 370 usd with a small break just before reaching it and this wouldhappen onthe 9th. After this we would experience most likely a drop to around 210 usd as Enky analysed. If we don’t see this drop we should follow the gold price. I am curious which one turns out to be true. personally I favour Enky’s prediction.

      2. As I wrote before – I am bearish on BC market at this point.

        However, yesterday proved the buyers interest at levels 320-340. Ergo, it is logical to not try to break this support, but do the opposite – break the resistance at 345. Then sell at higher price until the interest will fade away. And then easily put the price to the confirmation level of 270-290. Based on my knowledge, it is a very small chance to jump back to 400+ without another confirmation below 300. It would be the extremely bullish behavior and market does not express it.

        I believe gold and silver (silver chart looks even more similar to BC then gold) and BC are from the same class of instruments. They are hedge assets. That means if economy does great and interest rate is going to be increased, these assets will eventually lose value. And vice versa in case of the economy troubles the value will skyrocket.

        Once US economy posts the best year since 2008 and FED wants to cut helicopter money and even hints for the rate increase I am bearish mid and even short term on the BC market. Though it does not cancel price recoils after dips.

    1. Arthur

      Hey Michael, thanks again for sharing your thoughts. What would be your stance on the following: presuming we drop to the low 200 in the upcoming weeks somewhere, we will most likely see a rebounce again. My thoughts would be that we should rebounce to at least $266 (previous top) otherwise we would loose momentum in the building up of volatility, preparing for a next good jump to ATHs. Would you agree? Or does your experience say something else? I mean, breaking the previous top of $266 is also the breaking of a long term trend in the bitcoin space, so it would influence the mid term expectations. Just curious what your thoughts are. Thanks man.

      1. I believe, it is premature to talk about the next round down below $270. There should be buyer’s enthusiasm to be exhausted. As the volume is relatively low these days, personally, I do not believe in strong movement up. It looks too artificial.

        So I see the swings in the range $395-$320 until bids will weaken for a week or so.

        This is time of the day traders. Since this morning I am in cash 100%.

        My explanation of .5 day delay in correlation between BC and commodities: the gold price is played in US, but the BC price moved by China. So every night after US gold close. .5 days delay. Wink. Wink.

    1. Enky

      Yes, usually there is a propensity for the equity’s price to increase or decrease to reach the mean.

      1. Andre

        Is this true for btc as well? As the volume changes everyday and also there is no assumed price for it yet? ?

  2. Christian

    Good read Enky, people should sell at 370$ unless the stop being the scared sheep they have prove to be in the past. I beleive Bitcoin is past the us economy manipulation by now. I will keep mine anyway since we are very close to the bottom. If the all mighty us regulators can’t see the benefit of a more equal, better and faster way to exchange wealth that leaves a trace, others will do.

    I think the of the matter was who can control it and the answer is nobody even with asic. This is like the new economical arm race and the whole world invited to the party. This is only the beginning of the joy ride for the early adopters which we are still…

  3. Christian

    Sorry again for the typo, I should really take the time and effort to review before submitting

  4. Christian

    The state of mind is still there, you should not look for pennies in the hay stack while your are at the wheel for the first time in mankind relatively short history in the financial, digital era… Think of the box

  5. Christian

    Got caught again… I am really thinking faster than I can think, not to mention my talking abilities… I got in trouble more than once but Bitcoin seems to be bullet proof on the long run 😉

  6. Christian

    Or type (the thinking thing), the currency who knows? The protocol is the future of all transaction conducted on the face of the hearth for a very long time… If you allow this one to live than you are better off, Because the next one will be much more battle hardened and eventually any further improvements would prove uncontrollable and devastating to institutions which are very reluctant to change. They Know it, but the beautiful about it is that they can’t do shit about it…. The genie is out of the bottle…

  7. Christian

    For now currency and protocol are still linked but if we let it go they might be able to separate it. If they do, you (we) loose and they win, If not, they will buy into in no matter the price because there is no other way, At least in free countries. The rest have to gain their own freedom, we just do it for them. Nobody can control this if we still believe in it, but we can all benefit from it.

  8. Christian

    In other words, this only alive because authorities wanted to make a payment system out of it, not a new wealth creating platform, but now you can change things, HOLD HOLD and HOLD and mighty will kneel before the many… My two cents…

  9. Christian

    Not anytime soon , but it will come… It all depends if you are looking for quick pennies on buck or jus a little more than that

  10. Arthur

    Thanks Enky, for another well-written update. I too was having my thoughts when that 30,000 XBT wall popped up on $300, then disappeared, then popped up again, etc. I found it a rather amateurish move (why not sell them OTC for a possible better price?). Anyway, I just went 100% back in fiat at 367.50 since 370 seems like hard to break indeed. If needed, I’ll buy back in around $400. Now let’s see if we can play this out somewhere in the low 200s in the upcoming weeks. Would mean quite something for my bitcoin trading stash, and the average coin price would drop substantially too… Fingers crossed again. Good luck to everybody, happy trading!

    1. Enky

      An amateurish move for an equally amateurish exchange:)
      I understand your plan but considering the order book it seems that it can go above $ 370 and actually it is doing it right now. I suspect it is headed to $410 where there is now the mid term vwap (2 months)

      1. Astenn

        We did not break the 400 border.
        Bitstamp did come close to the 400 tho. BitFinex did not.

        I missed my opportunity to bad 🙂 its already down to 350 again.

    2. Arthur

      Yup, thanks Enky, also for the quick response. I too noticed that 380 was almost hit so at the correction down to 370, I quickly went back into XBT. Minor loss, but it’s all in the game. Would it mean the low $200 is out of the question now (guess not)?

  11. Christian

    For one thing, it was not amateurish. The guys playing down the market for months went in despair to break it on Sunday and wanted to create a panic sell to go to ~200$. They failed…

    1. Arthur

      “…went in despair… They failed…”

      You could be very well right, but for that reason also, it was even more amateurish after all, I guess. The people buying those coins at $300 are now on 25% profit. The people selling those coins are now on a 2+ million dollar loss. Some people got fired instantly for playing around with money like that…

  12. Christian

    The intent was not to sell but to prevent rebound, this lost a lot of money on that day. 27K Bitcoin is no more, he lost several thousand btc, he might not want the price to go down just now…

  13. Christian

    Two walls now, 395 and 400… Some people with a lot of coins want to stop any rebound from happening and keep on pressing the price down but in the end, after months of pressure, they might be running out. When they do, price will sky rocket again, it could be any time now. It seems obvious the market is being manipulated and it has been for quite some time now.

  14. Christian

    btc is a tiny market, the exchanges can be very, very easily manipulated for now. Bitcoins are seeling for 500-600 USD on the OTC market in the states right now and brokers are making a killing

      1. Anathema

        People who trade OTC have deep pockets. Just look at the effect that “30K guy” had on all exchanges. It’s too disruptive for the relatively small volumes on exchanges. Maybe that’s why he did it though, because it was 30% cheaper?

  15. Christian

    Hummm trader I guess… It will be interesting to see if 400$ is solidly tested and those whales get burnt again, they might let it go for a while.

  16. Christian

    To be honest with you neither do I for the most part. I don’t think I will be using Bitstamp anymore other than to cash out USD. Kraken seems much better but they do not support USD which is good because there in the States and bankers are giving them problems. Enky or others, I am curious, which would be the best Exchange as we speak? The one with the most liquidity and best platform?

      1. Christian

        Well said, it would need to be a decentralized framework, just like the Bitcoin network is. I really need to take the time to look at Ripple. Even if not perfect, the best for now would be?

  17. Christian

    “Because they don’t trust the Exchange” and if Bitcoin really takes off it will be worth at least 100 time this value within 5-10 years

  18. Christian

    Since there is a deliberate and programmed deflation in supply, the value of each unit must appreciate in value very much to accommodate a larger economy which can translate into demand. No matter what the are used for, more and more people will want the tokens or coins but fewer will be available.

    Now, I know this is a big debate and Bitcoin could also be broken up before it reaches critical mass but if it does let’s say capture more than 1% of the global economy, it will only be a matter of time before it starts swallowing entire nation currencies and give so much head wind to other implementations of the protocol that traditional currencies could get literally vaporized within 25 years

  19. Christian

    Anyway, the future of Bitcoin as a currency is not a sure bet but its still doing very, very well. Bitcoin, the protocol will change everything about the financial infrastructure on a planetary scale. Brace for impact, it is not if but when… Only a matter of time. Not that one should believe everything written on Coindesk but I think Tim Draper views are right…

    http://www.coindesk.com/tim-draper-bitcoins-price-still-headed-10k/

    1. FJ

      Yes, but: Where I come from it is not allowed to send more than approx. 2000 USD abroad without reporting it to the authorithies. I tried to pay cash in a store some time ago- 7000 USD- and they had me fill in a form because cash paynets above USD 1500 or so was supposed to be reported. This to avoid any kind of illegal activities. I come from a small, northern european country and I guess we have stolen these regulations from elsewhere. How can Bitcoin work without regulation? If an au-pair working in my country wants to send USD 3000 home to the Phillipines, is it really likely that any country will accept this happening without regulation? Is there not some major fuck-up in the making? Big time co-ordinated regulation?

      1. Christian

        Of course, nothing is perfect and we can’t tell how long it will take for governments to figure out they are are better if their people are doing well. Bitcoin is a new financial tool, it is not well understood and for that particular reason it strikes fear to the regulators which are now just control freak for the most part. They just want more and more money, but more is never enough because it is very badly managed for the most part.

        Bitcoin price can be manipulated, the actual network is very strong and probably able to resist any by now, but it could theoretically be compromised with all the right circumstances aligning together. No matter what, the Bitcoin protocol will live on and really take off when the power in place realize that it can’t be beat or the actual traditional financial goes to shit, which is likely to happen before long 😉

        Let’s face it, no way for G8 to pay back what they own in a billion years like it is right now, it’s only a matter of time… Countries already went broke, bankers went broke and major us cities went broke. In time, it will be coming on a larger scale

  20. Christian

    the network can resist almost anything by now… In the end, I don’t think btc is going up, everything else is going down… Most of the time, regulation is not there to protect you, but to make sure you are kept under control. It’s for our own good. Strange that people seems to live better lives when they have more freedom…

    1. Christian

      This is priceless information Anathema… I have looked at many more us hearing by the Congress and other org. They are getting aware this is not something that can be changed or controlled in any way, it is here to stay and it will change everything about how people are transacting with each other. What can be regulated is the use of it not the actual thing which is self regulated by the code.

      They will also be able to use the Blockchain technology for their own business. This seems like a no-brainer, let’s start or own and who cares the actual Bitcoin currency?

      Well first of all, it would need to be open source for everyone to review. Secondly, a Blockchain distributed database can only be as secure as it is distributed and powerful. It took about 6 years for Bitcoin to become powerful as it is now. Not only time, but it took a lot of trusts. It will take much effort, resources and trust to be able to replicate it on a similar scale.

      Not to mention that the actual Bitcoin Blockchain is getting exponentially stronger. It would take huge incentives for miners to drop it for a new kids on the block. It would also take enormous investments and effort to try and take it by force. I mean by raw computing power at a scale able to outrace the actual miners. Not impossible but very unlikely because to outcome would also be very unpredictable…

      Thanks again for the info

      Cheers!

  21. Christian

    By the way, Bitcoin is beautiful, it is uniting everything and everyone together in a very special way. I would like to withdraw a previous statement about traders and trading. Even if there are a lot of places were traders are actually only making a margin and showing only interest for a profit. Bitcoin battle hardened traders are and will be necessary in the fight to keep this technology democratic and available to everyone willing to participate.

    Happy and successful trading, keep the faith in doubtful times because this is here to stay. We are building the infrastructure of a future financial tool that can bring significant improvements to the ordinary people financial freedom at a global scale.

  22. Arthur

    Looks like we have been creating a wedge pointing up last few days. If so, we should be dropping anytime soon.

    1. Arthur

      I strongly advice you to withdraw that bet. Because otherwise start saying bye bye to soms hard-earned satoshis. 😉

      Seriously, I’m not betting. But let’s revisit this subject on Friday somewhere.

      1. FJ

        Okidoki, bet’s off. But seriously back: those satoshishis are not hard-earned, if earned they come pretty easy. And in the long run, a few people selling and buying Bitcoins to and from eachother (AKA trading) will lead to nowhere, Bitcoin will die. The only thing that can make things happen is if someone starts using it because they see that it is an improvement to the existing system of transferring money. A phillipine maid in Sweden can save serious money mhen sending her payment home in BTC in lieu of USD. Wannabe millionaires who invested 5000 USD in December and “lost” 60%” so far if they have not sold off in panic already are not really helping build anything. Take care and may your god go with you. 🙂

      2. Arthur

        Hats off, FJ! You predicted it well, and I was wrong. 🙂

        Now let’s see where this rather aggressive break will bring us. I’m 100% back in coins, so let’s rock ‘n’ roll…

  23. Christian

    100% behind FJ on this. That being said buying in January 2014 was not well advised. In the end, Bitcoin is very resilient and will leave behind much of the day traders. This is why I said battle hardened traders are good for the community. Good traders will make more coins and hopefully upset the market manipulators creating rebounds. Bad ones will loose coins, but the protocol will roll on no matter what. In this space many small players moving together can still override one big guy because of that lack in liquidity.

    This very circumstance happened not long ago, the 27k wall was seriously bitten at and the guy retreated before it was too late… To see it as a share or a stock exchange is a big mistake, it is much more than that.

    I bought my first ones in the middle of the April 2013 bubble and I would still make more than a 100% return if I sell them now. I could have double my stack by selling and buying back at the right time, but who knows when the market is being manipulated aggressively?

    Bitcoin traders needs to be more the like of knights than greedy selfish fools… Because like I said before, you can fool some people some times, but you can’t fool all the people all the times…

    1. “It is true that you may fool all of the people some of the time;
      you can even fool some of the people all of the time;
      but you can’t fool all of the people all of the time.”
      –Abraham Lincoln, 1865

  24. Did not think the 400 would be broken :/
    Now the big question is will is stay above 400? or will it drop towards 300 again?
    i do not dare to be bullish anymore after what happened the past 2 months. There can be a huge drop any day.

  25. Arthur

    Hi Enky, just curious about your professional opinion about the current situation.

    Is this 410 spot the place to go down again, searching for the low 200s, or is there a growing possibility that we are entering a bullish phase?

    Asking because I noticed that 1 week RSI and 1 week KDJ on bitcoinwisdom are now firmly pointing up from the lower ranges…

    1. Arthur

      ROFL! Not betting again, because I’m quite sure I will lose such bet. I was thinking almost the same in fact (450 in 1 or 2 days if 410 is broken, then correction down to 420s). Let’s see.

      1. FJ

        Well, I was just pissed because you asked Enky about the Bitcoin future and not me. Good luck, anyway, maybe you deserve it…:-))

    2. Enky

      Hi Arthur, i’m busy at the moment but asap i’ll publish an update. At the moment i’m still bearish, this is only a rebounce from a very oversold situation, my weekly average is still bearish.

      1. Arthur

        Thanks Enky, I know enough. It was one of my options also, that it overshoot 370 to the next resistance for that reason.

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