Bitcoin rally could pick up steam during this month and a poor earning season over in the U.S. would fuel this rally
The International Monetary Fund downgraded the world economic growth outlook and this spurred the risk-off trade across the globe. The risk-off trade brought some life for bitcoin. It made a high of $6,656 but the price has retraced from this level as the move wasn’t supported by volume. What this means is that any breakout, upward or downward, should have healthy volume behind it and only this assures that the price would continue its move from here. If the volume isn’t there, it is more than likely that the breakout is only a trap.
The fact which has derailed the rally for bitcoin is that the speculators failed to see the IMF has also raised its concern about the cryptocurrency space. The Fund clearly stated in its World Outlook report “Cybersecurity breaches and cyber attacks on critical financial infrastructure represent an additional source of risk because they could undermine cross-border payment systems and disrupt the flow of goods and services. Continued rapid growth of crypto assets could create new vulnerabilities in the international financial system.”
As always, the upward momentum for bitcoin is lacking one critical element; participation from the wider community. Remember, the last year’s move towards the $20K was supported by the retail client. It was this crowd which was going crazy about the cryptocurrency thinking that buying bitcoin is the shortcut for them to acquire that Lambo which they always wanted.
No matter which exchange you look at, there is one common theme- there is no volume. A lot of questions are being raised about the opening of new accounts with various different exchanges and again the ugly fact is that the absence of a reliable third party auditor, no one can be certain if the audit process at these exchanges is as accurate as it should.
Bitcoin needs some sort of a blessing and only that can revitalise the rally for the currency. This particular blessing could be in the form of approval of an ETF from the U.S. Securities Exchange Commission (SEC). The department has invited parties or persons (basically public) to share their views in support of, or in opposition to, bitcoin ETFs. The date which is set for this is October 26th, 2018. To date, the SEC hasn’t approved any bitcoin ETF, in fact it has rejected nearly nine applications in this space.
I think that the SEC seeking a public opinion about the Bitcoin ETF is a positive sign, the department perhaps wants to respect the public opinion and most importantly wants to see the accurate landscape. If the public interest shows that the support is in favour of ETF it is highly unlikely that the department would reject an actual application which satisfies their criteria. In other words, this softened stance towards the industry by the SEC should bring the bull rally which the industry has been waiting for since last year.
In terms of technical analysis, I am going to avoid all those crazy jargons and keep things simple. The definition of an uptrend says that we should have higher lows and higher highs. The definition for downtrend is completely opposite to that of the uptrend. So, by looking at the chart below, we can't say that the price has an uptrend or downtrend. We have lower highs (shown by green circle) and then we have lower highs (shown by red circles). Hence, the only take away from this could be that as long as the previous lower low stays intact- meaning the price doesn’t start to make lower lows, the odds will remain intact that the price is likely to move higher.
We do think that the uptrend for Bitcoin could shape up this month because the global trade war has made many investors nervous and if the earning season over in the U.S. shows that analysts have downgraded their future forecast for earnings, this would create even bigger rout in the market. The U.S. mid-term elections aren’t that far either and the ongoing tussle between Italy and Berlin is only becoming worse.