Monday, October 15 brought some market surprise, as Bitcoin and several cryptocurrencies experienced a flash spike. Bitcoin price has since corrected, and we’ll look below at the technical analysis on BTC/USD on weekly charts.
Fundamental Outlook
The major news for the week was the fall of Tether to as low as 85 cents. Tether was supposed to be the first true “stablecoin”; a cryptocurrency that was pegged to the US Dollar and therefore expected to maintain exchange rate parity with the greenback. This parity was broken in early hours trading on Monday, when a loss of confidence in Tether led to a safe haven push into BTC and triggering a spike from the low price of $6,150 to a high of $7,200 on several platforms. The price even got to as high as $7,800 on Bitfinex.
Tether’s premier position as a stablecoin is being challenged, as several other such coins are being launched. Gemini, the exchange owned by the Winklevoss twins, has developed a stablecoin known as the Gemini Dollar (GUSD), and this coin along with three other stablecoins (USDCoin, Paxos Standard and TrueUSD) are being released on the stables of Huobi and OKEX exchanges.
The prediction on the cards is for Tether to continue to trade in the kind of uncertainty that shook its price on Monday, which means that we may be up for more volatility in Bitcoin price down the road.
Technical Outlook
The Bitcoin price chart shown below shows the active weekly candle following yesterday’s spike and eventual retracement.
BTC/USD Weekly Chart: October 16, 2018
Some traders who have been hoping for some bullish activity on BTC may have been pleased with what they saw early on Monday morning, but any hopes for continued upside were quickly dashed as BTC selling activity drove prices back down to where they have been in the last two weeks.
To get a clearer picture of where prices are likely to move from the current levels, we look to the daily chart below to provide some direction.
BTC/USD Daily Chart: October 17, 2018
On this chart, we can see the following:
- Monday’s wild price movement is captured in the pinbar, with a long shadow that confirms the hard selling action after the price peak, and whose closing price was the highs of the last two weeks at the $6,600 price level.
- Tuesday’s candle ended up being a doji. A doji is an indecision candle which is formed when buyers and sellers cancel each other out with very thing trading volume. But considering that we are at the daily resistance levels of the last two weeks, this is quite significant for subsequent price movements.
So how will these scenarios play out?
Trade Scenario
The flash spike on Bitcoin and other BTC-linked cryptos such as Litecoin and Bitcoin Cash actually has nothing to do with any change in the fundamentals of Bitcoin. This is exactly why the spike could not be sustained and sellers brought the price of BTC back down to reality. In fact, nothing has really changed and the market sentiment continues to remain bearish.
Therefore, the expectation is for price action on the subsequent days of the week that will end on October 20 is for price action to actually trend downwards, towards the support levels of the last two weeks. The daily chart still shows the symmetrical triangle formation and it is very likely that we will see further tests of the support line shown on the chart.
If the $6,200 support line eventually gives way and the price candle breaks below this level, then we can expect a further test of the next support area (long-term support) at price levels of between $5,800 and $6,000. This will take several days to play out and may even extend into early November.
Trade Scenario
The other Bitcoin price scenario would be for BTC to continue to trade within the range formed by the symmetrical triangle on the daily chart, in which case the $6,150 – $6,200 price area would continue to form the support and the $6,600 – $6,700 would continue to form the resistance.
Market Sentiment
The long-term, mid-term and short-term outlook of Bitcoin price for the BTC/USD pair is:
- Long-Term – bearish
- Mid-term – neutral
- Short term – neutral
Please note: this analysis was done on weekly and daily charts. It takes a whole week for a candle on a weekly chart to form, so these moves may take several weeks to play out. Entries should be made on shorter time frame charts such as the daily chart.
