China Strikes Again
The People’s Bank of China, conducted an impromptu inspection some of the biggest exchanges in China. Price plunged as soon as word was out, from its $1085 highs, down to $951. Over the past 3 months, the world’s 2nd largest economy was partly responsible for the bull run of late 2016, and fully responsible for all the market turmoil and sell offs in 2017. Despite a reduction in global Yuan trading volumes, China’s impact on Bitcoin’s price continues to be a force. But, not for much longer. 2 expected Bitcoin ETFs in the United States are gaining investor appeal, while Japan is 2 months away from legalizing Bitcoin as a payment method in the small pacific Island. The price of Bitcoin is in limbo.
Since the last analysis, an inverse head and shoulder pattern we were expecting played out. The second right shoulder dipped to a low $853, before moving back to the neckline, consolidating and breaking up to retest the previous high at $1139. The target for this inverse H&S was $1085. While price fell short at $1073, it is reasonable to conclude this move is now complete.
On January 3rd 2017, when BTC was just inches away for taking out the All time high of 2013, the People’s Bank of China summoned exchange operators for a closed door meeting. Price nosedived to $754 over the next 4 days, but quickly recovered, clawing up the daily charts to $1073. Again, PBOC swooped in on exchanges operators. The digital currency reacted sharply to reports over heightening concerns that Chinese regulators would tighten oversight.
“Platforms trading the virtual currency risk being shut down if they skirt rules on money laundering and foreign exchange” said the Wall Street Journal.
The impact of the PBOC surprise reverberated across exchanges as news spread. Bitcoin sold off sharply to support at $920, sparking fears of a bearish change in trend.
“Bitcoin’s relatively small market cap means that even a small splash sends ripple across the globe. Events such as these can trigger enough fear, uncertainty, and doubt for emotional selling worldwide.” Josh Olszewicz
Many now wonder whether the PBOC’s moves are intentional“Or maybe they are manipulating markets to make huge gains at the expense of “stupid westerners”: sell, shock market, buy back cheap. They have done it before several times”
As of writing this, BTC is trading at $1000, and is consolidating within the $1020 to $980 range. The best to expect in the coming week is more sideways. At this point, trading is simply gambling against PBOC.
Upcoming Bitcoin ETF Decision Expected to Cause Market Frenzy
The COIN ETF, and Bitcoin Investment Trust by Barry Silbert which plans to list on the New York Stock Exchange, are two palatable products for mainstream investors. There has been much talk of attracting new money into Bitcoin via pension funds and traditional wall street firms. Some analysts are forecasting market frenzy if the SEC approves COIN ETF in March; targets are as high as $3,678 and a modest target of $1800. A rejection would culminate in a low price target of $551.Christopher Burniske said to the Wall Street Journal “My concern is that the launch of an ETF could lead to irrational exuberance if the price of bitcoin appreciates dramatically,”2017 and 2018 are certainly going to be great for Bitcoin as it continue to break into mainstream investment circles as digital gold 2.0.
Bitcoin Weekly Price Forecast
This week i expect price to consolidate within the $1020 – $970 trading range, sideways. Recent actions of the PBOC and the SEC ETF decision expected in march means traders are ambivalent – it could go either way. Bullish targets are upto $1800 in the event of an ETF approval. Perhaps a consolidation within ascending triangle wedge till late in the year before a break out.
The bearish alternative case, which i see as more likely, is a retracement to the 0.764 – 0.618 fibonacci level range, measured from peak to peak – August 2015 $193 low and January 2017 $1138 peak high. A large fractal correction of the entire move to about $500 – a level that coincides with the target of a post COIN ETF rejection.
To be fair, the market has been in a steady rise since 2015, and a correction of this magnitude would not be abnormal. Unless the ETF is approved, expect more bearish momentum.
Some Elliott Wave analyst, suggest the market is in an ABC correction, with the most recent $1075 high as the peak B, which will be followed by a sharp, longer drop C to levels as low as $700.
In the coming weeks, I expect at least a retest of $800, even as low as $640. It is a bad time to be in the market for medium term traders. Best to be out of a position now and wait for $600s to reevaluate. But then, there is the other matter of the ETF, an unexpected event.
Seeking Alpha said,“We assign a probability of 35% for approval against 65% probability for rejection, making our final weighted average expected price $1645.45 or a +67.8% expected return above the current price.”My summary is $465 if ETF is rejected by SEC, $1800 if it is approved.Contact this author at [email protected]