Bitcoin Price Analysis – 28th October

Posted by: pesa_mic

October 28, 2015

Bitcoin moved up higher this week, from a low at $ 262, to a high of $ 295. Here is this week’s 6H chart

In last week’s analysis, I was expecting a correction to much lower levels than we found this week, before moving on up towards $300. $ 262 was the lowest support, from which the market bounced up to resume the past 2 months of a run up. With most bottoms, a second test of a firm support is usually necessary to confirm. $262 was followed by a rise to $ 276, and thereafter a 2nd test of $264. What followed was a run up with intent, taking time to break past $ 275 and thereafter heading up to $ 295.

A similar pattern seems to be forming, possibly looking for a bottom before attempting to take on $300 – a significant level over the whole of 2015.

Since January, 2015 a range has been evident between $ 200 and $300 with spikes on either side. The latest run up from August 27 formed a clear hammer marking a rejected bottom, before trending up to $ 292 presently. it seems a fairly obvious pattern. Bullish announcement (VAT exempt in EU), Chinese capital control speculation have delayed a downtrend I have been calling for. Question is whether we break $ 300 – $315 zone and hold, or resistance forces price back down. Remember there is an auction on November 5th of 44,000 BTC – the last stash of BTC seized from Silk Road bust. It’ll be interesting to see how/if it affects price.

3 is where price sits now, 23% fibonacci level from peak to peak ($162 low in January, $ 316 high in July). This level has to be overcome to achieve $ 300 + prices, it failed at 1 and at 2. Comparing volumes at each of these peaks (1,2 & 3), 4 exhibits confidently high volumes that could break past previous peaks. It also coincides with breaking above 50 day EMA.

“I feel the market wants 300 though. The only place we don’t look overbought to me is on the weekly and still some room on the 3d. I’d like to see a pop past 316 (2000 CNY) and consolidation above 300 (especially above 2000 CNY) to confirm we have a new trend”

For this week, watch $ 276 where 23% fib cuts across, and on failure of this level, support from converging 100 and 200 EMA lines below, potentially cutting across $257 – $260. If that fails to hold, then this run up was a dud and its back down to $200

“If we break the 300-316 mark there will be a large rally because I am sure many are short around $300 or so. This is a significant area for a short term reversal on the 4H, with ~268~ a fair target”

We are in crucial territory, and as I highlighted in last week’s analysis, “speculation and sentiment on trading forums are in favour of a bull run to $360.”

BITCOIN FUNDAMENTAL NEWS

EU Top Court Rules that Bitcoin Exchange is Tax Free – Bloomberg

This was fantastic news for bitcoin, after the European top court declared the exchange of virtual currencies and fiat currencies at points such as exchanges, VAT exempt across the 28 member states of the European Union. In essence, this puts Bitcoin on equal footing with fiat money.

” [bitcoin transactions] are exempt from VAT under the provision concerning transactions relating to currency, bank notes and coins used as legal tender.”

Bitcoins can now flow freely, unlike before, where Swedish exchanges had been forced to withhold VAT on all bitcoin-fiat transactions on their exchanges. Daniel Hedqvist and Skatterverket – Sweden’s tax office, took the dispute to court, culminating in this ruling.

Regulating bitcoin has posed a challenge for authorities because “it has properties of a commodity, some of the properties of a currency and it’s also a technology,”

Ruling found here verbatim

Bitcoin and Bullion Soars As China’s Creeping Capital Controls Loom – Zerohedge

Bitcoin pushed up to almost $300 this week amidst speculation on the impact of Chinese capital controls on non-fiat assets – bullion and bitcoin. Admittedly, there is little hard evidence of capital flight into bitcoin. Sometimes however, undercurrent is enough to induce markets to move, with little regard to validity of headlines. Recall the Greece run up in July that was purely speculative despite only patches of adoption by Greeks.

Regardless of facts, the uncanny correlation with events is visible on charts, thus dismissing the idea is a sure way to get on the wrong end of a trade.

China is pulling out all stops to rein in market instability, even going as far as “launching a plan to inject pension funds into capital markets in 2016 with estimated size of 2 trillion RMB!” – an announcement made today. What we are witnessing is an increasing number of bitcoin mentions in time of capital controls and economic crisis that forebodes the role it will play as a safe haven asset class in the coming years.

Updated: 2015-10-28