Bitcoin Analysis: Week of Aug 31 (Intro to Time)

In last week’s post, we concluded with the following statement:

"We are currently Long-Term Bullish, Intermediate-Term Bearish, and Short-Term Bullish. We will treat the US$500 as the support that is holding the price up, so assuming it does; the highest probability target is the bottom of the triangle at US$560. Once it gets there, the situation will be re-evaluated, but the most likely outcome is some more downside into early September."

The price has been very stable which is not something said often in the Bitcoin community. We are pretty much in same position as a week ago. The price dropped a bit below US$500 but rebounded fairly quickly so nothing happened for us to be concerned about. We continue to refer to this level as short term support and would consider it broken if we get a low that is lower then last weeks low of US$485, and this new low isn’t immediately reversed back over US$500. Time to take a look at the long-term chart as always and make a few comments.

Absolutely nothing has changed, we are sitting right on the rising trend line. Last week’s candle is giving us a high of US$535 and a low of US$440. Use these values as your guides of changes in trend, which at the moment is slightly Bullish from this Weekly perspective.

It is indicating that our upside hurdle is the 50% Fibonacci Line at US$630 but as you will see later in the daily charts, there is resistance in the US$560 zone that can be a struggle. The downside, if US$500 is lost, is to look for short-term double bottom at US$440 and if it can’t reverse the fall, keep an eye on the longer-term double bottom in the US$340-360.

Fundamentals (aka News)

This might have bin the slowest week of news in recent memory. They say no news is good news, which also applies to the world of bitcoin. Stability should be a positive for Bitcoin adoption. Of course we don’t expect this slow news cycle to last.

Just a few things of note for the week: the recent Bitcoin adopters like Dell and Expedia are impressed with the amount of sales volume they have received and Australia is in the headlines for their announcement over Bitcoin Tax Policy. You can read a great overview of major events over the last week in Cointelegraph’s weekend roundp.

Education (Intro to Time pt. 1)

Time analysis is a difficult task. Most traders stay away from it because it’s hard enough to get the direction right. For trading in the Fiat Financial Markets, the tool of choice for those who look to play both direction and time are Options. At the moment there are no option markets on any Bitcoin exchanges so all Time analysis is simply an interesting exercise without a true way of earning additional rewards.

We will provide some examples of Time analysis next week. In a nutshell a trader analyzing time is predicting on which days in the future a move will happen. In some instances you can have a day or a week marked off for a big move based on Technicals and not be certain of the direction.

Most people consider Time as linear, but one of the greatest economists and forecaster of our time sees Time as cyclical. Here is a recent post he had about Time on his blog Armstrong Economics. Martin Armstrong bases his models on the number Pi, which is the representation of a Circle. Having fun with this cycle theory in its basic form, Martin would take the Number Pi, give it a multiple of 10 which results in 3141.6 days.

Divide that by 365 (number of days in a year) to get 8.61 years as a time cycle for Major events. So multipliers of this value are ‘critical.’ Since Bitcoin is so young we’ll go ahead and dived this value by 4 (considering a half cycle is more significant than quarter cycle). We can now create the following chart as a reference:

Relevance

Cycles

Date

Calendar

Event

 

 

2009.01

Jan-09

Genesis

Minor

2.15

2011.16

Mar-11

Price Rose from <$1 to $30 Apr-Jun 2011

Significant

4.3

2013.31

Apr-13

The main month of the bubble to $266

Minor

6.45

2015.46

Jun-15

??? (Something interesting)

Major

8.61

2017.62

Aug-17

??? (Something big)

Obviously don’t expect these dates to be exactly right even if it’s more than just a coincidence, but if this series is alive and well a year from now, we will definitely keep an eye out for the summer of 2015.

Daily Overview

Here is the longer-term daily view where we are still referencing Fibonacci Retracements and a few Trend Lines. Notice that the picture has not been looking good ever since the descending triangle became recognizable. The US$490-500 zone is extremely important here. Our arrow back to the bottom of the triangle is thicker to indicate there is a higher probability of prices moving up and $500 support holding. This view however, is holding on by a thread. This move to US$560 should have been on its way by now and the longer price flirts with US$500, the higher the risk of a price drop.

We will continue to use the ‘Thickness” of arrows to indicate probability of the moves. The thicker the arrow, the higher the probability of that move.

The zoomed in view continues to stress the importance of US$500. We have made the arrow back to the $US440 area a bit thicker this week, but we are still slightly bullish for a rebound back to US$560.

Conclusion

We are currently Long-Term Bullish, Intermediate-Term Bearish, and Short-Term (very tentatively) Bullish. We will continue to treat the US$500 as support until visibly shown otherwise. The highest probability target is the bottom of the triangle at US$560 though some confidence has been lost in this move since last week.

If it gets us there, the situation will be re-evaluated, but the most likely outcome is some more downside back to the US$530-500 zone. Some confidence in the move lost because the longer we hang around US$500 the more likely it is to break down.

Two other scenarios are shown on the short-term chart. If US$500 cannot support the price and we fall back down, look for a double bottom back in the US$440-450 range, and if that gives way as well, we are looking at US$340-360 as next line of defense. Another less likely outcome to keep on your radar is a breakout over US$560 in which case there is some resistance at the top of a triangle at US$580 then the $630 Fibonacci line.

Reference Point: Saturday Aug 30: 2:30 pm ET, Bitstamp Price US$505

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About the author

Tone Vays is a 10 year veteran of Wall Street working for the likes of JP Morgan Chase and Bear Sterns within their Asset Management divisions. Trading experience includes Equities, Options, Futures and more recently Crypto-Currencies. He is a Bitcoin believer who frequently helps run the live exchange (Satoshi Square) at the NYC Bitcoin Center and more recently started speaking at Bitcoin Conferences world wide. He also runs his own personal blog called LibertyLifeTrail.

Disclaimer: Articles regarding the potential movement in crypto-currency prices are not to be treated as trading advice. Neither Cointelegraph nor the Author assumes responsibility for any trade losses as the final decision on trade execution lies with the reader. Always remember that only those in possession of the private keys are in control of the money.