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The Euromoney Blockchain Forum 2016 • June 21-22, 2017

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Bitcoin Bears Look to Seize Control Over the Weekend

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BTC-USD is down around 5 percent from the start of March 24, falling below the psychological handle at $1000 and breaking support at $1017. Bears look to have snatched control of the market. If the price of bitcoin remains below $985.67 until March 25, then bearish dominance will be confirmed, with a possible downtrend ending near $750. In this article, we will also look at ways to hedge against the mounting uncertainty regarding the rift between Bitcoin Core and Bitcoin Unlimited. 

BTC-USD Bears Begin to Show Strength

Bitcoin has fallen below the $1000 level on negative sentiment surrounding software and technical changes in the ongoing block size debate. The daily chart below indicates that bulls have lost control of the market, as the price action looks to close below the Ichimoku cloud for March 24. If the market remains below $985.67 on Bitstamp until March 25, then this will confirm a bearish Kumo breakout, opening up targets at $944.36 and $910.00.

However, if the market regains $985.67 by March 25, then we should see BTC-USD tend toward the conversion line, which provides resistance around $1100.

A possible shift in momentum was indicated on March 21, when it was clear that a red Ichimoku cloud had formed. Notice that the change in the color of the Ichimoku cloud shifted forward along with the breakout suggests that bears are starting to take control and we will see a long-term drift to key supports outlined by the yellow rays. Initial targets lie at $944.35 and $910.45, but also the fractal support at $751.34.

Notice that the Awesome Oscillator is also giving a bearish signal, with yesterday's bar green and higher but has been followed up today by a red bar and moves lower. Therefore, this opens up a potentially profitable short trade from the low of the price action on March 24. The indicator suggests that we should set limit sell orders at the low of the price action for March 24 and setting a target of $752.34, as bearish momentum will most likely continue and strengthen over the next few days.

However, if we see a double bottom form on the Awesome Oscillator, we would want to buy once the oscillator turns green in color, as this would give an indication that bears have become exhausted.

The lagging line has not yet moved below the Ichimoku cloud, suggesting that it may be best to wait until fractal support is broken at $944.36 until entering a sell position on BTC-USD. However, once the lagging line pierces below the cloud, the downward trend that is confirmed could easily dive as low as $751.34.

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The shorter-term outlook is displayed below with the 4-hour price action on Bitstamp. The Ichimoku cloud is red and the thickness of the cloud indicates a strong support zone around $1050 to $1100. Also, notice that the cloud is starting to move lower, suggesting more downside for BTC-USD.

Bearish momentum is indicated by the base line, which is higher than the conversion line, and is also signaled by the Awesome Oscillator, which is diving deeper into negative territory. Limit sell orders are suggested just below the fractal support standing in the way of bearish dominance at $944.36. The next significant support lies at $913.73.

Notice also how the lagging line has moved below the previous price action, suggesting further losses for bitcoin. The conversion line offers resistance around $1011 and buy positions are only suggested once the market closes above the conversion line. Even then, the market may be cut short at the resistance zone provided by the Ichimoku cloud around $1050 and $1100. The fact that it is moving lower means that the equilibrium price of BTC-USD is also declining, with the cloud likely to settle around $1000.

If the market fails to break support at $944.36, then we should see the market tend back into equilibrium and move toward the Ichimoku cloud. Therefore, we could place limit buy orders just above $944.36 to take advantage of a reversal.

Hedging Against a Hard Fork

While bitcoin has slumped, market participants can profit by selling bitcoin, locking to a USD value with a Mycelium wallet or buy altcoins. For instance, ETH-USD has appreciated strongly on March 24, gaining over 12 percent.

Interestingly, as BTC-USD displays a bearish Kumo breakout, DOGE-BTC exhibits a bullish Kumo breakout on the daily timeframe on the Poloniex exchange, which could suggest that the fears of hard fork and the aftershock could be leading investors and traders to hedge any undesirable events within bitcoin with safer alternatives; dogecoin is a popular altcoin that has been around for a while and is known for its strong, cohesive community, so it makes logical sense for investors worried about the block size debate and hard forks to part their investment into something that will be more stable for the time being.

As well as a bullish Kumo breakout, the Ichimoku cloud has changed color to green and the lagging line has pierced above the Ichimoku cloud too. All three of these Ichimoku signals point to the beginning of a long-term uptrend for DOGE-BTC. Also, notice that huge jump in volume on March 24, suggesting price action will be supported and move higher in the next few days or so. For example, look at the huge volume jump earlier in March, foretelling the move of DOGE-BTC above 25 satoshis. We should now see the market tend toward fractal resistance at 0.00000037.