In the past week we've had a significant pullback in the Bitcoin valuation.
It's my opinion that this drop caused a cascade effect in the crypto space due to the resulting bearish sentiment.
Even though Bitcoin in itself should not affect the price of other crypto's it is still considered the leader in the cryptospace by shear marketcap and recognition, therefore it has enough influence to cause a change in the entire market.
It's said by many bullish investors that crypto doesn't trade by technicals.
However I'm willing to share some insights to point out why I think this is wrong.
In the days previous to the pullback I was watching a very clearly defined pattern.
The most significant indicator being the RSI indicator on the weekly timeframe.
I don't think the following chart needs much explanation as it clearly demonstrates a very defined pattern of RSI peaks on the weekly timeframe followed by on average 30% pullbacks.
On 11/12/17 I created this chart.
Also the price had been even more extended then in previous runs going up almost 200% in one month.
On 14/12/17 I guesstimated my taget at 11K.
And sure enough on 17-12-17 Bitcoin got so overextended by ongoing hype it reached it's limit and the inevitable happened.
Looking closely at previous runs it also became clear that the bottom would be reached when RSI got around 22 on the 4h timeframe, as you can see. And indeed this also happened like expected.
Future Expectations
If the same cycle continues to happen one would expect the next target to be within the 30K range.
However, monthly RSI is still sitting at an alltime high. Which leads me to believe a bigger long term correction or consolidation needs to happen before the price can safely go up again.
If not this cycle, the next drop might be even bigger.
Final thoughts.
I think the question needs to be asked if Bitcoin is still a viable currency for the future of digital payments.
As the load on the network has increased exponentially , transcations have become increasingly slow and fees have been consistenly rising.
Let's also not forget the underlying burden that Bitcoin mining has become to our enviroment.
It's being said that bitcoing mining at present uses as much electricity as 3 million US homes.
70% Of this mining is being operated in China, a country which gets 60% of it's electricity from coal.
Take into account that mining becomes increasingly difficult and expensive the more Bitcoins have been mined
and you end up with an unsustainable situation.
Work is being done to make the Bitcoin network scale better then it is right now, but I wonder if it is not too little and too late.
Meanwhile better alternatives are quickly making it's way up the foodchain as a faster and cheaper alternative to Bitcoin. My personal favorite being Ripple.
I would advise investors to be carefull from here on out, as the almost default bullish trend of Bitcoin might sooner or later be broken.
Keep them wallets ready. Not for BTC tho. BCH maybe?
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