Since the last post (https://medium.com/@dennyk/cryptobubble-continued-what-is-the-likeliest-scenario-from-here-88b7fd406ac9) in which I went into detail on the Bitcoin chart and a few news items, Bitcoin has largely performed as expected, meaning it has further built out a downward trend and has struggled to clear $4000/4200.
I am writing this update as the technical situation has slightly improved in the mean time. As per yesterday, Bitcoin has broken its downtrend ever so slightly, but is still sitting below a channel resistance and it is therefore hard to tell if this will turn out to be a so-called “bull trap” (meaning the price reverts back down). Furthermore, the RSI has broken its strongly negative divergence, which might signal that the major leg of this correction has ended. These two signals are the main reason an update makes sense here. Note that the reason for yesterday’s break to the upside was that ECB president Draghi said that the ECB cannot regulate Bitcoin. Traders seem to take this positively, though all Draghi meant was likely that it would be up to the European Commission and Parliament to regulate, not that regulation isn’t in the cards.
I see two short term scenarios from here:
(1) Bitcoin breaks resistance and rises up to the $4200/4300 level. At this point I still find it likely that it builds out leg B (see my earlier post) of the correction and takes another leg down to complete the A-B-C formation. However, if we get to $4200 I think there is realistically a 50/50 chance the price will keep rising instead.
(2) Bitcoin comes back below $3700. If this happens, the original scenario is still in place and there is no change in technicals vs my last post.
Notably, regardless of the technical situation, I believe that “headline risk” from the SEC and especially the 2x hardfork remains high. If I were an investor I would therefore not invest fully before these two issues clear in any case. As I always stated, I remain positive medium term on Bitcoin, but I continue to see short term risks. I also expect the entire crypto space to more or less follow Bitcoin’s lead, which is why I stick to analyzing its chart and news flow.
To repeat from earlier posts, all of this is my personal opinion and never investment advice. Cryptoassets can go to zero and you can lose all the invested fiat.