In the final analysis article for CoinTelegraph a few weeks ago we concluded with the following:
We remain bullish for the time being with an eye on our final two targets of US$300 and US$330. It always depends on how it gets there but most likely these would be good target to take some Bitcoin profits and watch the global economy unfold. There will be more Merchants coming on line but the value proposition for the consumer to use bitcoins over a credit card is not yet made. This will continue to be a burden on bitcoin’s price for the time being.
Two additional scenarios in order of higher probabilities
Bearish: The bearish alternative begins to show its signs if the price falls under US$250-255 zone. It gets some teeth under US$223 and if we fall under US$200, it will be a very depressing spring as we wait for the EU fireworks of Greece defaulting mid summer.
Bullish: The primary case is already pretty bullish, but in order to start thinking about the moon, the price needs take on the 200-day SMA the same way it just did the 50-day SMA last week. Moving above the 200-day SMA, then coming back to test it in that US$330 are, opens the door for moves to US$400 and US$440, but without a full blown sovereign debt crisis and bond defaults, the odds of reaching these marks at the moment are pretty small.
So what happened? Everything was looking great; we hit our second to last target of $300 and pulled back to $290 and then there was a major news event. News broke that one of the biggest Free-Market website – Evolution decided to run off with all the users coins, which are being estimated to be around $12 Million though others put the number over $30 Million. This caused major havoc in the price of Bitcion mostly due to fear that all those coins will hit the market for immediate sale to fiat. At the time I sent several tweets that it was an overreaction and the price should rebound back to the breakdown point of $280, but this has been taking an extended amount of time to materialize which should add some doubts for the bullish case.
Market Thoughts
As you can see in the Tweets above, an explanation of Free-Markets is probably warranted. A huge market gap opened up after the take down of Silk Road and it is now clear that users of Silk Road learned nothing from the loses they absorbed. No one should have been ruined by theft at Evolution. Every single user of that site should have been withdrawing their bitcions daily and hence minimizing the damage if the admins walked away with the bitcoins or the federal agencies confiscating them like in the Silk Road case.
Now let’s talk about whether a Free-Market where anything is up for sale can be trusted. At the moment, you have to assume that no admin of a site like that should be, but just because you don’t trust the admin with your wealth does not mean that you can’t use it for transactions. In that case what really maters is the view of the site admin over privacy. For example, I would much rather talk over a communication medium where the creators are anonymous but believe in privacy, over using Facebook Messenger, Skype or Gmail where everything is monitored & can be reviewed by government agencies. Markets work the same way, but just like it’s not a good idea to have all your contacts, friends and pictures at some unknown websites where all your data is secured but can be lost if the website disappears, your wealth in the form of bitcoins should be treated with the same view.
So what does this do for bitcoin’s price? At the moment what it did is kill the momentum to $330 and now the more likely long-term trend is a resumed bear market after this minor rebound takes its course.
Market Outlook
Here is a one-year look back with daily candles.
Even thought there are a few positive signs we can point to, this chart definitely looks more bearish than bullish. The $255 support line that has been in place since the start of the year held things up this week, but if it falters it will probably be a quick way down. If Bitcoin is to make new highs we should have been way above $300 by now so there is definitely significant downside to worry about at the moment.
The Zoomed in Daily chart is sitting just above the 50-day SMA but we need to close the day above it. For the first time in almost a year there was a triangle that broke in the opposite direction of expectation. We had a really good run because these triangle break as expected just 2 out 3 times and we had a streak of 7 in a row prior to that one. There is just no strength in this market, we just need more time for people to fully understand the power of bitcoin.
The Hourly chart that is usually profiled on Twitter (@Tone_LLT) has been pretty messy the last few days. It broke down from the $260 range showing all indications of a collapse in prices but has since rebounded above $270 indicating that it’s ready to retrace the panic selling from last week.
Conclusion:
Bitcoin’s overall trend is turning bearish though it may have some legs to make it back to $280 and at most back to $300. The $330 target we had before is definitely off the table for the time being. Pretty soon expect the price to dip back down and approach $200. There is some support around $255 but it most likely does not have the power to hold up the price much longer if we go back down to it.
Reference Point: Sunday Mar 22 11 pm ET, Bitfinex Price US$270
Disclaimer: The price projections above are just opinions of one trader. It is meant as a guide or fresh look on some of the reader’s personal views on bitcoin. Trading in general (but especially Bitcoin) is incredibly risky and should only be done with capital one can afford to lose.