Bitcoin is close to exit from three-month consolidation

For almost three months, the Bitcoin chart has been drawing a characteristic figure of technical analysis – a triangle. Now this figure is close to completion, and in the coming days a new major movement is likely. But where?

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1 What draws a graph

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At the peak reached on June 26, the Bitcoin exchange rate approached $ 14,000 – it has not been so high since January 2018. But after only 3 weeks, on July 17, BTC was already “resting from the jump” a little above $ 9,000. Since then, the first cryptocurrency has not gone beyond the limits of this range.

A lingering correction always creates uncertainty and anxiety in the market, especially when it comes to volatile assets such as cryptocurrencies. Traders and analysts know that after a long consolidation of the price at about one level (and now Bitcoin has been dancing around $ 10,000 for a long time), the price makes a big breakthrough, covering a distance comparable to the width of the consolidation. And the triangle is one of the most classic “correctional” figures. Thus, after exiting the existing triangle, bitcoin can either return to historical highs or collapse to the levels of the beginning of “cryptocurrency”.

But any market consists of real traders with real money, and behind each figure on the chart there is a change of mood of large groups of people with large capitals. And all price movements are generated by events in the real world, even if they become known later than the movement itself.

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External background

What economic, social and political factors today may be decisive for the movement of bitcoin up or down?

Many associate 2019 cryptocurrency with the development of corporate cryptocurrencies of social networks – TON (recently launched a test network) and Libra. But in reality, the development of these projects is unlikely to have a positive impact on Bitcoin and other independent cryptocurrencies: social network tokens are centralized, dependent on parent corporations and regulators. And at the same time, they are very weakly connected with public blockchains. Rather, their successful launch will take away some of the audience and money from Bitcoin: many investors may prefer regulated tokens. But now, these projects are facing active opposition.

Institutional investors, on the other hand, are still interested in the cryptocurrency market. This is evidenced by the ongoing attempts to bring cryptocurrency ETFs to the market (regulated mutual funds from one or several assets traded on stock exchanges), and the growing volumes of Bitcoin futures trading on CME, and the creation of new platforms for trading already delivered futures. Perhaps the last factor promises the most positive dynamics: after all, settlements on delivery contracts require the purchase of real bitcoins, and they will have to be taken either from the market or from large holders. One way or another, the demand for bitcoin will increase. And today the first of such platforms should be launched: Bakkt, which is already actively accepting deposits in BTC. This is a significant news feed to exit the protracted consolidation.

We should not discount trade wars and growing political tensions, and signs of an impending recession in Europe, and perhaps a new wave of devaluation of fiat currencies. For Bitcoin, this will be another test for the status of a “protective asset”: has the cryptocurrency matured in order to compete with gold and other “shelters”?

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Mining capacities and demand for equipment, and the process of accumulation and concentration of bitcoins continue to grow. A little more than six months remain until the next halving of the award to BTC miners. All of these indirect factors also contribute to the future growth of bitcoin.

What draws a graph

Below are two bitcoin charts over the past few months. On the first – a daily chart with a triangle against the backdrop of growth since December last year, called “cryptocurrency”, on a logarithmic scale:

As you can see on the chart, the main scenario assumes continued growth, since against the background of long-term movement, the current correction looks quite modest. But markets are unpredictable, and alternative scenarios always exist, all the more so as bearish sentiment intensifies during the correction.

This same triangle is depicted in a larger close-up on a 12-hour chart:

For the “wave”, this triangle can be considered exemplary: the classic lines 0-B-D and A-C- (E) are observed and throughout the whole figure there is a constant drop in trading volumes. Now the lines are getting closer to convergence, which means that the spring is tightened and the breakthrough is getting closer.

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But the “red” scenario, which suggests the development of correction, in the current structure looks no less convincing, especially since the upper line has a steeper slope. This means that the forces of the “bulls” and “bears” are approximately equal, and the scenario of going up makes only a higher-level picture a priority. Exchange glasses are more full in the direction of purchase, but with a strong downward movement, many traders will cancel orders and may even open speculative positions for sale. Consequently, the situation will remain tense at least until the “go-ahead” for bidding at Bakkt, which is expected tonight Moscow time.

Where will Bitcoin go tomorrow?

Nobody knows this, not even Satoshi Nakamoto. But the fact that another major movement is brewing, we can speak with confidence. The longer the lull, the stronger the storm. Today, her signs are visible more clearly.