In-depth market analysis

BTCUSD market analysis

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bitcoin consolidation before market breakout

A short term consolidation of BITCOIN before a projected potential breakout in the market

Summary

  • The 4 hourly chart and daily chart shows a potential consolidation of the price towards the MA200 figure around 8300 (currently trading on exchange at 9169 as of 4th Feb 2020)
  • As long as we stay above the MA200 range we can continue to see positive movement up (in the medium to long term)
  • The planned BITCOIN halving due in May should see support of the price, limiting supply increasing demand
Strong bullish rally in Bitcoin
Figure 1: 4 hourly chart of the exchange traded price of BITCOIN

The price action recently on shorter term charts (hourly, 4 hourly and daily) demonstrates of price exhaustion in buying therefore suggesting a pull back in the near term.

We have previously at the end of 2019 a quick challenge to the highs of 10000 and a necessary retracement has now happened.

How far will this retracement go? In advance of the planned BITCOIN halving we can see support for the price around the 7300 levels which suggest a decent price point where investors can see decent longer term returns.

bitcoin halving

A feature of BITCOIN is that every four years it becomes harder and harder to mine for BITCOINS, and in this four yearly cycle the reward given to miners is halved. This supply/demand principle is necessary for any asset to become valuable over time, and was programmed into the BITCOIN algorithm from the beginning.

This suggests an obvious opportunity which will happen soon in the coming months, and then won’t happen again for another four years.

As we know, BITCOINS are generated by the complex calculation of the BITCOIN algorithm. This expensive computing effort is rewarded by generating valid BITCOINS for a miner and thus generating more assets available in the market.

Whilst this suggests generating BITCOINS becomes harder, the decrease in supply should have a positive increase in price.

where do we go from here?

To support our longer term analysis and the market consolidation that has happened, lets look at the MACD diagram for BTCUSD (which is a diagram to determine trend), we can see on the weekly level how the market is positioning itself:

Histogram bars to filter the best trades

In this diagram, we can see how over the past few weeks the amount of BITCOIN sold (in red) has overtaken the amount bought (green) and now slowly we see buyers returning to the market.

This gives us an indication for the market sentiment for BITCOIN itself suggesting in the coming weeks strong demand for BITCOINS to return.

No doubt, world news has an impact on any asset, let alone BITCOIN. With China (the biggest market for BITCOINS) suffering from the Corona virus outbreak, there would naturally be reduced buying activity in the short term. When that is resolved, the Chinese investors will rebound in a strong way.

In summary, look for a market retracement/pullback to technical levels around the 8000, 7000 levels before a strong push before the BITCOIN halving towards the 10000+ levels.