Bitcoin Price Analysis: December 9

Posted by: pesa_mic

December 9, 2015

At the time of writing this, the price of bitcoin just broke out of the $380 – $ 390 resistance zone that has been pushing back on it this week. At $ 420 now, it is not a foregone conclusion that it has convincingly broken this level. From recent events, spike to $ 504 some weeks ago, it is not unusual for price breakouts to retract forming long wicks. So, it is wise to observe the formation of a complete candle on the 3 day and the 1 week chart for good measure.

This chart shows the significance of price action now, where, the 200 EMA is currently supporting price, after the run up in November broke above it. Significant because the last time price was above it was in September 2014. As a long term moving average line, it is unlikely to break overnight, so price movement here might gradual and drag out.

This week (1) was mostly sideways consolidation, limited to a low of $ 358, before moving up towards $ 400 and breaking above it. The market is making higher lows and now seems intent on $ 470 – ideally the next target. At $ 470, an uptrend reversal pattern from November 5 marks a resistance level; here too i expect sideways consolidation and possibly a pull back.

“Bitcoin appears very bullish, even staying below this line the trend is up, however we could easily see if break up again and charge towards next resistance line at $460. It looks very much like bitcoin is bullish again.”

Bullish fork extensions show where to expect resistance and support levels going up, such as $ 465 (pointed arrow). Sentiment has turned bullish again, with technical reasons to support this expectation. I will admit, the price level here is decisive, but I remain skeptical until at least $ 500.

My caution is informed by the first chart above I posted last month, that forecasted a drop from $ 500, a correction to find a bottom and a retrace back up to retest highs.Similarly, chart 2 also compares the pattern now to a pattern in May/July 2014. The takeaway is an expected retrace after a second top. I am keenly looking out for this, but remain open to the possibility of an invalidation and resulting higher prices.

The upside potential is exciting, as it could go up as high as $ 640, a high from May 2014. It will be exciting to watch it unfold

BITCOIN FUNDAMENTAL NEWS

Overstock gets SEC Approval to Issue Shares on Bitcoin Blockchain

While banks and incumbent financial institutions scramble to conjure their own private blockchain, Overstock is betting on the Bitcoin blockchain. Bitcoin magazine reports the company plans to issue publicly tradable shares on Bitcoin where – ‘the trade is the settlement’. This development means settlements would occur instantaneously vs the typical 3 day settlement period.

“(SEC) has approved a S-3 filing for online retailer Overstock.com to issue new publicly traded shares of the company on the Bitcoin blockchain.”

In July 2015, Overstock issued a historical $5 million bond cryptobond on its t0 platform, riding on coloured coin technology.

With all the hype around ‘blockchains’, this is a great proof of concept for Bitcoin.

Goldman Sachs: “Blockchain, can change… well everything”

This week, GS sent out a research note to its clients talking up the blockchain as disruptive. According to Business Insider, “Emerging Theme Radar” note was pretty clear:

“While the Bitcoin hype cycle has gone quiet, Silicon Valley and Wall Street are betting that the underlying technology behind it, the Blockchain, can change… well everything.”

Interestingly, to elaborate on the theme, GS used an illustration of how the bitcoin blockchain works, which is puzzling considering they seem to completely disregard the value of bitcoin the currency.

While there are use cases for consortium blockchains, the value proposition of bitcoin/Bitcoin remains intact, and I expect it to come out on top in the long run. This is mainstream finance’s way of dipping their toes.

“Private blockchain is the gateway drug”

New Development on How to Scale Bitcoin, from Hong Kong

Segregated Witness (SW), a new proposal to scale Bitcoin and increase capacity X4 without requiring a hard fork, got the attention of the bitcoin community and experts for its ‘genius’ approach to achieving scale. Pieter Wuille, a blockstream developer behind the proposal, had dismissed its viability until recently, but, now expects it to be completed in a ‘number of weeks’

SW has attracted enthusiasm for its less controversial approach to scaling; avoiding a hardfork is generally favored

“There’s consensus that a soft fork is better. You can deploy it much sooner, because you just need the large majority, and in a hard fork you have to upgrade everyone. It’s a straightforward idea, the concept is not that risky or complicated.”

Coindesk has a detailed coverage of the scaling conference, and slides of the proposal here

Bitcoin Weekly Price Forecast

This week I am bullish and expect this run to continue – upto a limited retest of $ 480. My first instincts are always to doubt popular market sentiment, which right now is incredibly bullish. I am however, aware of my bias and open to price going as far as $ 640. I advise a healthy dose of skepticism for balance, as we approach $ 500.

Updated: 2015-12-09