The introduction of the new Goldman Bitcoin report, illustrates how mainstream Wall Street is paying much closer attention to bitcoin, despite high volatility and lack of regulation in the digital currency world. This week, bitcoin and the blockchain technology behind it made the cover of a well-respected investing magazine, Barron’s.
Sheba Jafari, Goldman’s top technician issued her second ever forecast of Bitcoin price movements this week.
About a month ago Goldman issued their first ever Bitcoin analysis, where Jafari said that “due to popular demand, it’s worth taking a quick look at Bitcoin here” and warned that “the market has come close (enough?) to reaching its extended (2.618) target for a 3rd of V-waves from the inception low at 3,134.” She ultimately stated “wary of a near-term top ahead of 3,134” and urged clients to “consider re-establishing bullish exposure between 2,330 and no lower than 1,915.”
You know what, she was spot on: on the very day his paper came out, both bitcoin and ethereum hit their all time highs and then suffered their largest drop in over two years.
Being dead on in here first forecast got our attention, so now what does Jafari think will happen next? According to the top Goldman technician, Bitcoin is now “in wave IV of a sequence that started at the late-’10/early-’11 lows. Wave III came close enough to reaching its 2.618 extended target at 3,135. Wave IV has already retraced between 23.6% and 38.2% of the move since Jan. ‘15 to 2,330/ 1,915.”
It’s worth keeping in mind that fourth waves tend to be messy/complex. This means that it could remain sideways/overlapping for a little while longer. At this point, it’s important to look for either an ABC pattern or a more triangular ABCDE. The former would target somewhere close to 1,856; providing a much cleaner setup from which to consider getting back into the uptrend. The latter would hold within a 2,076/3,000 range for an extended period of time.
However, which as we have noted, at that point the next major breakout higher would take place, one which would take bitcoin as high as $3,915/16.
Either way, eventually expecting one more leg higher; a 5th wave. From current levels, [Bitcoin] has a minimum target that goes out to 3,212 (if equal to the length of wave I). There’s potential to extend as far as 3,915 (if 1.618 times the length of wave I). It just might take time to get there.
At the end of the day Goldman believes “[Bitcoin] could consolidate sideways for a while longer. Shouldn’t go much further than 1,857. Eventually targeting at least 3,212.”