Wild Week in Bitcoin
We all understand the volatility in cryptocurrency but this past week has been an exception. In just the past 7 days we've seen Bitocoin break below $7,000 USD, dip to $5500 USD and shoot right back up to its now $7800 price. During this time we saw the rise & fall of Bitcoin Cash which peaked at $2500 and is now at $1000.
Bitcoin has risen over 30% in the past four days and many are asking if this is the push to $10K or if we will top hear near the old highs.
To be sure, we're due for a pause but I would certainly not be shorting this market. It could just as easily keep going to $8K and as we'll see in the chart below, the technical indicators on the daily chart still have room to run before reaching extreme levels again.
While Bitcoin has been the best place to be this week, I watching a few of the big altcoins here.
Bitcoin Bull & Bear Scenarios
The chart above is the daily chart of BTC. I was expecting it to pause as it bounced into resistance below $7000 but it blew right past it and has continued higher.
As we approach the old highs, there two scenarios I'm illustrating on the chart. One bullish and one bearish.
First the bull case: The RSI is at 66 and still has room to run before hitting over-bought conditions on the daily chart so if the trend continues, we will likely see $9K before year-end. Also, the MACD is just now turning but we know that it tends to lag a bit anyway.
Ideally, we want to see prices follow the path of the blue arrows with a brief pause here followed by a break to new highs next week. This would be the best case scenario as it would allow the overbought readings in the shorter time frames to cool off a bit. Going straight up too fast never ends well so ebb and flow is always best.
The Bear Case: Prices stall out here and begin to pull back sharply breaking below the $7K level creating a big double top pattern on the daily charts. This would coincide with a bearish divergence on the RSI levels and could see prices retest the $6K mark. I was hoping for a pullback earlier but now that prices have gone up this far, I DO NOT want to see $6K again as it would be very difficult to overcome such a bearish chart pattern and would likely mean further downside.
The good news is that the fundamentals are strong for Bitcoin and getting better. Bitcoin futures will bring more market participation and could ultimately lead to a Bitcoin ETF. This is ultimately going to get more mainstream attention and we'll see an even larger number of retail investors entering the space next year.
Also, Jack Dorsey's payment company Square has announced they will be testing Bitcoin on their platform. With more companies embracing Bitcoin, it will further encourage adoption of cryptocurrencies. Because of the strong fundamental outlook for 2018, I leaning bullish. We may see some pullback here but I think we're going ultimately going higher.
What about the Altcoins?
Unfortunately, an across-the-board rally in the altcoin market was put on hold, first with everyone scrambling to Bitcoin Cash last week and now, with Bitcoin rising very quickly. There have been some strong names for sure, but it's not across aboard yet. Look at Lisk, IOTA & EOS for example.
Where is Bitcoin Cash headed next? We're now at $1000 so far it seems to be consolidating here. Following that big reversal, the chart looks very bearish here but we could see some funds come back in if Bitcoin pulls back here. It's oversold near-term so I would not be surprised to see a decent bounce here.
A few names are sitting tight here and should be watched:
ETH
LTC
DASH
XMR
