by Jamie Holmes
December 7 showed excitement in bitcoin markets, as bulls demonstrated their dominance with bitcoin breaking the $14,000, $15,000 and $16,000 levels in quick succession. The price action showed the largest one-day gain in the cryptocurrency’s history, almost $3000 on the Bitstamp exchange.
The price of bitcoin has firmly secured the five-figure range not just for the US Dollar, but for the euro and British Pound too. Similar to how these currencies crumbled under the pressure when BTC-USD broke $1,000, we see a similar dynamic play out with the 10,000 handle. With bitcoin above $16,000, this puts the cryptocurrency at around £13,000 and €14,000. The next psychological levels; $20,000, $50,000 and $100,000.
As we stated in our previous price analysis, the break of $11,395 opened the door to the $13,500 resistance zone. However, the market managed to push through this level, as bulls displayed strength on December 7. The next resistance zones are found just above $17,000, then around $20,600 and finally $22,780.
The chart below shows the price action on the daily timeframe for the Bitstamp exchange. BTC-USD managed to close above the $16,000 level on November 7. Also, notice we have an almost perfect bullish Marubozu candlestick just freshly formed, so we expect to find support at the open and 50 percent levels, at $13,623.00 and $15,111.50 respectively. The market has also approached a crucial resistance, namely the Fibonacci extension level at $17,088.96, so we may see an attempt at this level beaten back. Therefore, we suggest setting limit buy orders at $13,622.90 and $15,111.40.
BTC-USD (Daily) – Bitstamp closes at $16,599.99 on December 7.
Fibonacci support stands at $13,569.74, near the open of December 7’s candlestick, so this zone should provide strong support. Volumes have also been rising on the Bitstamp exchange, supporting the move higher over the past few days. A break of the $17,088.96 resistance would open up an attempt at $20,607.74. Therefore, we could set limit buy orders around $17,089.06 to take advantage of a bullish breakout. On the other hand, those bearish on bitcoin might want to set limit sell order at $17,088.86.
US-based exchange Coinbase experienced massive demand, with the market for bitcoin peaking just below $20,000 at $19,697.00. As the price has moved into five figure territory, arbitrage opportunities have become more frequent and intense. For instance, the difference between Bitstamp’s and Coinbase’s BTC-USD rates have exceeded $1,000 at some points during December 7. At the time of writing, the price difference is around $800. Similarly, the BTC-EUR rates for Bitstamp and Kraken have also diverged significantly in recent days.
A dominant exchange, such as the CME with bitcoin futures contracts, could emerge over time and provide more of a consistent price for the cryptocurrency across the ecosystem. For instance, Matt Brief, head of dealing at IG Group, noted the “interesting arbitrage opportunities” between exchanges:
“If there’s a dominant marketplace, then maybe all liquidity will go to one place and we will have more of a uniform bitcoin price. At the moment, it’s a lot more subjective.”
Arbitrage is also known as a ‘risk-free trade,’ since you buy bitcoin from the exchange with a cheaper price, and you can sell it on the exchange with a higher price without any risk of losing money. In fact, Perth-based Warburton Global Macro Fund has formed a profitable strategy of arbitraging bitcoin prices between American, Asian and European exchanges.
BTC-USD (Daily) – Coinbase exchange experienced a surge in demand, pushing the price to $19,697.00.
The 15-minute price action is shown below for Bitstamp. The most recent fractal levels are highlighted by the yellow, horizontal rays at $16,450.80 and $16,126.96 respectively. Since the market is above the most recent sell fractal, we should see bitcoin test the $17,088.96 resistance and gyrate around this level before deciding on the next direction. A move below $16,126.96 will open up the support at $15,111.50.
BTC-USD (15-min): Resistance seen at $17,088.96, watch for newly formed fractals (and subsequent breaks) for clues on market direction.