Bitcoin pushed past $8,200 in trading yesterday, rising to $8,270 at the moment. Although the move is positive, it is not the powerful thrust that analysts claim is necessary to really break out and challenge the $9,000 level. BTC has been range bound since early June, confusing analysts and investors alike. Is it accumulating strength, or is it exhausted and preparing for a 30%+ correction? The folks over at Forbes just ran an article entitled, “No One Actually Knows What Bitcoin Will Do Next”, but one analyst is not so sure.
Omkar Godbole over at Coinbase has researched the historical record for Bitcoin and come back with an amazing “find”. It is best told in pictures, or technical charts, if you will, from 2015 and 2019, laid one after the other:
Is this “déjà vu” all over again? The similarities between the two time periods are eerily the same, the suggestion being that Bitcoin, if it repeats the pattern from 2015, is primed to take off for the upper stratospheres. Technical Analysis (TA) can produce beautiful representations such as these and then be flat wrong. If John Keats had been an analyst, he would have said these charts were things of beauty that would last forever.
To Mr. Godbole’s credit, he did not look at these charts and boldly predict that Bitcoin would soon take off for the races. Their peculiar mirror image, however, according to him, “warrants attention”. He then proceeds to list a few caveats, like the fact that BTC has appreciated over 185% in its last run, that it ranged for nine months before breaking out in 2015, and that the relative strength index (RSI) is “signaling scope for a price pullback and is currently teasing a downside break of the trendline”.
At the same time, the folks over at Forbes also penned a recent article decrying the use of TA to make solid predictions of where Bitcoin might go in the near term or even the long term. BTC is still an emerging class asset with very little of an historical record of broad-based ownership to yield data that would produce creditable insights from a technical perspective.
Mati Greenspan, senior market analyst at brokerage eToro, reminds everyone that cryptos are still in their early development stages:
As we’re dealing with an emerging asset class, crypto evaluation metrics are still largely being developed. Stocks, bonds, currencies, and commodities all have decades if not centuries of price discovery, so analysts more or less know what to expect.
Greenspan elaborated that only the basics lend creditable insights at this stage:
The crypto market has only begun to mature in the last two years, so we don’t have any of that. What does work well for crypto analysts are simple technical analysis tools like support and resistance points, especially psychological barriers, as well as sentiment, trend, and above all momentum indicators.
Glen Goodman, a veteran trader and author of investment advice book, The Crypto Trader, also chimes in with the early maturity theme:
Bitcoin and crypto prices are all about excitement or lack of. Nobody really knows for sure whether or not bitcoin will become a major store of value like gold or even a new global reserve currency like the dollar. So any news short of an outright global ban of bitcoin tends to have little lasting impact on bitcoin’s price.
What about the contention that Bitcoin is exhausted and teetering on a precipice, about to make a major downward correction, down below $6,000, if you buy totally into this hypothesis? The majority of the crypto analyst community has been shouting this narrative for over a month, once again based on the historical record, Fibonacci ratios, and downright common sense. It would be a healthy move, the chorus choruses, a necessary thing in order to reach $10,000. For those investors that trust this counsel, they wait patiently on the sidelines for a chance to jump into the fray at bargain prices.
However, Scott Melker, a crypto trader at TexasWest Capital, questions those traders waiting for a correction:
BTC did nearly a 3x from the bottom, and people are still waiting to ‘buy lower.’ They call this phase ‘disbelief’ for a reason. If you have not bought and are still waiting to reenter the market, you should seriously evaluate if you should be trading.
Does anyone really know where Bitcoin is headed? Either way, up or down, the path will definitely be interesting, with several more technical insights to tempt us all.