Yesterday around this time I was writing my first post on Steemit about Bitcoin's imminent price direction when it plunged over $300 within an hour. Today, I want to give a longer term perspective especially after I heard some voices saying that we may be reliving 2014 and what it actually means for the price of Bitcoin.
Yesterday, I was looking at the short term trade opportunity by looking at the cables in simple terms. Today, I want to look at a slightly different set of cables and compare it to 2014.
Basically, all markets go through cycles and technically, many traders and investors use the same kind of indicators to evaluate those cycles. It just happens that these indicators simply work. There might be some fundamental factors such as negative news that act as the catalysts but the direction of the market is formed over a period of time before that catalyst sets it in motion.
If the story of bitcoin in 2013 was its meteoric rise in price, which saw it hit a peak of over $1,100 in November, then the tale of bitcoin's price this year is one of plummeting from those heights." - Coindesk's analyst wrote about Bitcoin in December, 2014.
Let's pull up that chart from 2014 below.
As you can see, Bitcoin was plunging for the first 5 months of 2014. Then over the summer it tried to claw back some of its lost value as bulls were fighting to make a comeback but in mid-August, the decline continued and landed at the same price from which that phenomenal rise to the moon started - around $200. So, it shaved off more than half from all time highs and then another half over the rest of 2014. Interestingly, it basically started trading around the peak of the previous rally - at $235. Just look closely at the chart.
Now, take a look at the thick cable. That is known as the 314 or (Pi) moving average. It is a simple moving average that is widely used by technical analysts across various market sectors for one simple reason - it accurately reflects the cycle that asset prices tend to follow over a longer horizon. If you know anything about Pi - it has to do with the circle. A circle signifies a cycle where you basically end at the same point from which you started your journey. Cool isn't it? If you wish, I can write a whole article about just this geometric figure because, guess what, it has a lot of symbolic prominence in all aspects of life here on Earth.
The Pi- curve was first breached in April, '14 and acted as a support for Bitcoin, then it bounced off of it, made a double top and went through it with the 50 MA (thin blue curve) going under it in a death cross sell-off.
Let's pull up our current chart for Bitcoin and see what we've got.
Look similar? The price of Bitcoin is sitting on crucial support that has held strong since February of this year. The 50 MA is about to cross the Pi-curve in a death cross formation. If the price finds support here again (it will be the third time which makes it less likely), that bounce-off may be very short lived. Clearly this situation is simply unbelievable to most crypto investors. But if Bitcoin is to relive its 2014 nightmare, it means we may be looking now at $5K as its next stop.
But there is a difference (at least, one). The difference from the 2014 crash is that Bitcoin today is more popular, more widely used and has made its way to many portfolios. And this is what should keep it afloat. But the 50MA should cross the Pi-curve - it does not mean it needs to be a huge sell-off. In other words, to gauge the magnitude from technical indicators is not always a good idea. If the 50MA can glide off of the Pi-curve within a couple next days, then we may have another mini bull rally. But this setup at this point is bearish so I would not go long, not yet.
I hope you enjoyed my second post on Steem and please follow, share, comment!
Peace.