Bitcoin is the original and by far the largest cryptocurrency. Since its introduction in 2009 it has grown exponentially and spawned many competing cryptocurrencies. Opinion is mixed as to its true worth, but speculation and huge interest has created a volatile - and potentially very rewarding - trading environment.

Updated: 15/08/2018 0640BST
0140EST

NEXT 48 HOURS

INDEX 48H

V= 3 C =4             Conditions:  downtrend
F=1  I=2 T= 3 S= 4  Strategy:  short spikes higher

Bottom Fishing

Bitcoin finally bounced at 5880, which is the original February low, slightly above the June 5750 low. Is the bottom in? The simple answer is "no". Not for the larger scale decline, and quite possibly not for the decline starting at 8500 either.

Certainly the move from 8500 is mature and a decent bounce is close, but it is possible the move to 5880 was still part of a consolidation and there is a final flush to new lows in a similar style to the June low. A break of the channel and 6500 resistance makes this less probable.

Even if the immediate decline is over, a bounce back to 6800 and 7200 is perhaps all Bitcoin can manage until the next (and final?!) leg lower to new lows in the high 3000s in line with the gold template. 

Bitcoin's path over the summer is sideways to lower, leading into a significant low later this year. This path is guided by the gold in the 1980s comparison as it struggled to recover from a burst bubble (see evidence). 

EVIDENCE

Gold 1980s comparison
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NEXT 10 DAYS

INDEX 10D

V=4 C = 3              Conditions:  downtrend
F=2  I=1 T=3  S=4   Strategy:  two way trading

Bitcoin has very likely topped just shy of $20k at the top of the extended channel. This first stage of the decline has likely already completed near $6k and Bitcoin is now in the second leg - a slow wedge working lower before the final capitulation to our target in the 3000s later this year.

Bitcoin has recovered from a post bubble crash before and it could do so again. Both the 2013-2014 and the NDX comparisons (actually pointed out by Morgan Stanley)  suggest one final leg (see evidence).

EVIDENCE

NDX comparison
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EVIDENCE

Gold 1980s comparison
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EVIDENCE

Rodrigue
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NEXT 3 MONTHS

INDEX 3M

V=4 C =2               Conditions:  DEFLATING BUBBLE
F=2  I=2 T=4  S=5  Strategy: SHORT

2017 was undoubtedly the year of the crypto-currency, led by the largest of the all, Bitcoin. While considered by many to be a currency, we follow the SEC’s classification and analyze Bitcoin as a commodity.

Bitcoin fundamentals are hard to gauge, and although the blockchain technology has huge potential, Bitcoin itself has little value; it’s too volatile to use as a currency or a store of value and the Bitcoin ecosystem is massively costly and consumes huge amounts of electricity. Indeed, the technology has been copied, and improved by countless of other crypto-currencies on and Bitcoin is little more than a speculative play. One narrative throughout 2017 was the increasing opposition by regulators and governments around the world who criticize crytocurrencies as a way of laundering money and avoiding taxes. China was one of the first countries to clamp down, banning ICOs (Initial Coin Offerings), and closing exchanges. South Korea and India are following suit, and although crypto trading easily migrates to other, more welcoming countries (Japan has officially recognized some exchanges and made Bitcoin legal tender) Bitcoin prices are reliant on public interest and participation which is clearly dwindlinge (see evidence).

In terms of price action, Bitcoin is now post bubble and will continue to deflate, first stabilizing in the 3000s, and as long as it holds the 2013 high of 1135 it may make an improbable last rally.

The eventual path depends on how cryptos develop - if Bitcoin becomes an alternate to gold and a store of value for a new generation, it may hold 1135 and turn higher to form a trend sequence above 20k, probably driven by a collapse in fiat currency. However, it is just as likely to be replaced with superior cryptos and continue to drift lower. 

 

EVIDENCE

Public Interest
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