It is a week for holiday travel in the United States, as its Independence Day falls on a Thursday. Since the majority of “non-fake” Bitcoin volume tends to be U.S.-centric, analysts are quick to note any variations that may occur when analysts and traders alike are taking time off to travel to see family or just to get away. Bitcoin had fallen from grace recently, trolling about $9,700 while it searched for valid support at the exalted psychological barrier of $10,000. Then, for no apparent reason, the world’s favorite cryptocurrency vaulted $2,000 during the 3rdof July, generating a wave of research to determine the reasons for such a positive thrust.
Following the recent rapid recovery above $10,000, Josh Rager, a well-respected crypto trader and analyst, who has been quoted often during Bitcoin’s rapid rise over the past five months, expressed positive sentiments regarding recent market moves:
Last couple days were a bear trap (in my opinion) and Bitcoin continues to look strong. Lots of buyer interest at $10k and see a move up over $12ks this coming week. One step at a time, will look to new yearly highs after $12k/$13k reclaimed.
From a technical perspective, the above chart relates an hourly depiction of Bitcoin’s recent pricing behavior. Nothing looks too out of place at this juncture. The picture is a typical “jerk-the-rope” scenario, where heightened fundamental drivers overheated the market, as in Facebook’s Libra Project media hype parade. Prices rose too fast and were soon slammed back to the path that had been established over the first half of June.
In technical parlance, the bulls got exhausted, but did not depart the scene. The bullish “green” hammer candlestick on the 2ndof July was evidence of that fact, and the follow through on the 3rdwas confirmation. Bitcoin now hovers around $11,600, a key Fibonacci level of 38.2%, a stable decision point that puts it right back on target.
Omkar Godbole, a senior analyst over at Coindesk, is not so sure that the bulls are ready to charge ahead just yet: “With the $2,000 rally, bitcoin has established a base of technical support around $9,600. The quick recovery could also be considered a sign of strong demand below the psychological level of $10,000. However, it is still too early to call a retest of the recent high of $13,880, as the cryptocurrency is yet to invalidate the most basic of all bearish patterns – a lower high. For that, the price needs to rise above the June 28 high of $12,448.”
Although this week is not a holiday period in other parts of the globe, a major portion of the analyst community is taking time off and using that time to delve into the data, in hopes of discovering new meaningful insights. Their recent “musings” fall into three categories:
#1 – The Holiday Surge Scenario
The theory here is that, when the general public has time off to commiserate with friends and family, Bitcoin quickly becomes a topic of conversation. Awareness spreads, and before you know it, there is a retail buying surge for BTC. A review of the historical record yielded the following data:
“The top cryptocurrency by market capitalization rose 1.17, 1.79, 3.35 and 1.67 percent on July 4 in 2018, 2017, 2016 and 2015, respectively, according to Bitstamp data. BTC’s Independence Day performance in the years prior to 2015 is mixed. Prices saw little change in 2012, rose 3.16 percent in 2013 and suffered a 2.63 percent loss in 2014.”
Will the 4thof July in 2019 become the fifth straight positive gain day for the holiday and for Bitcoin? It may be flat to negative after the $2,000 surge of the day before, but analysts would be quick to modify the theory to suggest a period of days, rather than a single day, i.e., whatever it takes to make an idea work.
#2 – The Contrarian Principle
Every analyst has learned the hard way that Bitcoin moves to the beat of a different drummer, more so than does any other asset class. There is one principle, however, that does seem to apply. When the “herd” believes something will happen, it is best to take the contrarian view. Herds are typically wrong. In that vein, a recent Twitter survey addresses this situation quite nicely:
A new Twitter poll sheds light into the current sentiment of crypto traders across the Internet. The majority of traders are expecting a correction down to $8,400 before another attempt at $12,800 is made. With Bitcoin’s rally stopped in its tracks at $14,000, crypto analyst, traders, and investors alike are expecting a deeper than average correction, and are readying their buy orders to “buy the dip” and load up their bags with sub-$10,000 BTC.
Could the market react as the “herd” expects? Yes, it could happen, but odds favor the opposite reaction. The time to buy into bargain Bitcoin prices may have come and gone.
#3 – Social Media Sentiment Indices
Analysts have been consumed of late by correlations between Google search criteria and surges in Bitcoin or altcoin prices. The folks at the crypto trading platform THE TIE have become the consummate experts on Twitter data and its implications for the crypto industry. Their latest study found that, “38.9 percent of posts on Twitter arose in the U.S., while 10.5 percent came from second place UK. Canada, Turkey, India and Australia were next most prolific tweeters, in descending order of volume.”
More importantly, THE TIE has analyzed tweets to determine what percentage is positive versus negative, a way of creating a consumer sentiment index for cryptos. What do these readings have to tell us? Per current data: “The U.S. is generally “exceedingly positive,” with 61.5 percent of tweets being favorable toward bitcoin. On average, 59.8 percent of bitcoin tweets are positive globally.” Could this positive sentiment be behind the recent $2,000 surge in Bitcoin prices? Your guess is as good as mine, but the conjecture surely does seem plausible.
Concluding Remarks
Holiday periods are a great time to relax, exchange ideas, and re-think your basic investment strategies going forward. By the way, there is another axiom within the investment world that states that major reversals have a way of happening after a holiday period, perhaps, not immediately, but soon thereafter. Traders and investors alike, as the theory goes, have time for introspection and often change their minds regarding their future posturing in the market. To be forewarned is to be forearmed!