Bitcoin Price Weekly Analysis – BTC/USD Decline Looks Fake?
Key Points
Bitcoin Price Downside Move and ETF Decision
There was a major event lined up recently, as the U.S. Securities and Exchange Commission announced their verdict to list the Bitcoin ETF. They decided against, and disapproved the request, which produced a sharp downside move in Bitcoin price. The BTC/USD pair was earlier seen trading close to $1200, but after the decision, the price declined. A new downside wave was initiated, as the price moved from the $1184 high to the $1061 low.
The recent rejection near $1184 was crucial, as a bearish line on the 4-hours chart (data feed from SimpleFX) of BTC/USD acted as a hurdle. The price also moved below the 100-hourly simple moving average (H4) at $1157. However, the sharp downside move found support near $1060, and the price recovered. The price has already moved above the 50% Fib retracement level of the last decline from the $1184 high to $1061.
At the moment, the price is attempting to move past the 76.4% Fib retracement level of the last decline from the $1184 high to $1061. If that happens, the price could head above the highlighted bearish trend line. However, a break won’t be easy, but no doubt, the price has recovered well and the decline looks fake.
Looking at the technical indicators:
4-hours MACD – The MACD has reduced most of its bearish slope, which is a positive sign.
4-hours RSI (Relative Strength Index) – The RSI is attempting to move back above the 50 level.
Major Support Level – $1100
Major Resistance Level – $1185
Why Bitcoin lost 15 percent of its value in a few minutes
The value of bitcoins plunged more than 15 percent on Friday afternoon after the Securities and Exchange Commission rejected an application to create the first exchange-traded fund (ETF) for Bitcoin. The proposal would have made it easier for ordinary investors to buy bitcoins, but the SEC is worried that these investors could be cheated in the largely unregulated Bitcoin marketplace.
The ruling has been closely watched in the Bitcoin world. A favorable ruling would have given the cryptocurrency a stamp of approval from an influential regulator, and it also could have sparked a surge in Bitcoin’s price as it provided an easier way for people to invest in this exotic new asset class.
An ETF provides a way for people to buy an asset or a group of assets as if it were a single stock. There are ETFs that let people invest in gold, wheat, and every stock in the S&P 500. Right now, investing in Bitcoin is a cumbersome process that creates the risk of having your wealth stolen by hackers. A Bitcoin ETF could simplify the process, allowing anyone to invest in Bitcoin using an ordinary brokerage account.
The proposed Bitcoin ETF was the brainchild of Cameron and Tyler Winklevoss, twin brothers who once sued Mark Zuckerberg for allegedly stealing the idea behind Facebook from them when they were all students at Harvard. After settling that lawsuit for millions of dollars worth of Facebook stock, the brothers began investing in Bitcoin startups. They announced plans to create a Bitcoin ETF in 2013, and their proposal has been working its way through the SEC ever since.
But the SEC wasn’t impressed with the proposal. The law requires the SEC to make sure that a newly traded asset existed in a well-regulated market that adequately protects people from manipulation and fraud. But the SEC saw little evidence that these conditions were met. Bitcoin is primarily traded in unregulated markets located overseas, especially in China, and as a result, the price of bitcoins is extremely volatile. In the SEC’s view, Bitcoin exchanges are not yet mature enough to justify opening them to the general public.
“This creates a chicken-and-egg problem,” says Jerry Brito of the pro-Bitcoin Coin Center. “How do we develop well-capitalized and regulated markets in the US and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?”
Analysts expected that SEC approval for the Winklevoss proposal would send Bitcoin’s price soaring, as millions of ordinary investors suddenly had an easy way to buy into the Bitcoin market. That expected rise was likely priced into Bitcoin’s price ahead of the SEC ruling, which would explain why a negative ruling led to a plunging value for the cryptocurrency.
Even after the latest turmoil, however, Bitcoin’s value is way above its level in the past couple of years. A year ago, you could buy one Bitcoin for only about $400. Now it’s almost three times that value.
Using Google Trends to Detect Bitcoin Price Bubbles
Willy Woo is an entrepreneur, angel investor, derivatives trader and cryptocurrency enthusiast.
In this guest piece, Woo discusses the recent run-up in bitcoin price, and the methods he uses to determine if and when bitcoin is overvalued.
Simply put, Google Trends is a great way to track the growth of active bitcoin users.
The search 'BTC USD' serves as a proxy for the engagement of active bitcoin users as they check the daily price. In the chart above, the baseline denotes the exponential growth of active users, while the height above the line illustrates their engagement levels.
When engagement levels run high, bitcoin users are in party mode, checking the price daily of their precious coin. If engagement levels are too high, that's when we are in a price bubble, and it's a good time to sell.
Conversely, when engagement is at a low (marked with green dots), this is a good time to buy. Put together, Google Trends is a pretty reliable buy and sell indicator.
So, what does this say about the recent run-up in price?
Here, we can see bitcoin is not in a bubble, and that there is likely still plenty of room for our current bull run to continue.
- Bitcoin price saw a lot of swing moves recently against the US dollar due to the SEC verdict to list Bitcoin ETF.
- The price was rejected completely near a bearish line on the 4-hours chart (data feed from SimpleFX) of BTC/USD near $1184.
- However, the price is losing the steam, and remains at a risk of a downside move.
Bitcoin Price Downside Move and ETF Decision
There was a major event lined up recently, as the U.S. Securities and Exchange Commission announced their verdict to list the Bitcoin ETF. They decided against, and disapproved the request, which produced a sharp downside move in Bitcoin price. The BTC/USD pair was earlier seen trading close to $1200, but after the decision, the price declined. A new downside wave was initiated, as the price moved from the $1184 high to the $1061 low.
The recent rejection near $1184 was crucial, as a bearish line on the 4-hours chart (data feed from SimpleFX) of BTC/USD acted as a hurdle. The price also moved below the 100-hourly simple moving average (H4) at $1157. However, the sharp downside move found support near $1060, and the price recovered. The price has already moved above the 50% Fib retracement level of the last decline from the $1184 high to $1061.
At the moment, the price is attempting to move past the 76.4% Fib retracement level of the last decline from the $1184 high to $1061. If that happens, the price could head above the highlighted bearish trend line. However, a break won’t be easy, but no doubt, the price has recovered well and the decline looks fake.
Looking at the technical indicators:
4-hours MACD – The MACD has reduced most of its bearish slope, which is a positive sign.
4-hours RSI (Relative Strength Index) – The RSI is attempting to move back above the 50 level.
Major Support Level – $1100
Major Resistance Level – $1185
Why Bitcoin lost 15 percent of its value in a few minutes
The value of bitcoins plunged more than 15 percent on Friday afternoon after the Securities and Exchange Commission rejected an application to create the first exchange-traded fund (ETF) for Bitcoin. The proposal would have made it easier for ordinary investors to buy bitcoins, but the SEC is worried that these investors could be cheated in the largely unregulated Bitcoin marketplace.
The ruling has been closely watched in the Bitcoin world. A favorable ruling would have given the cryptocurrency a stamp of approval from an influential regulator, and it also could have sparked a surge in Bitcoin’s price as it provided an easier way for people to invest in this exotic new asset class.
An ETF provides a way for people to buy an asset or a group of assets as if it were a single stock. There are ETFs that let people invest in gold, wheat, and every stock in the S&P 500. Right now, investing in Bitcoin is a cumbersome process that creates the risk of having your wealth stolen by hackers. A Bitcoin ETF could simplify the process, allowing anyone to invest in Bitcoin using an ordinary brokerage account.
The proposed Bitcoin ETF was the brainchild of Cameron and Tyler Winklevoss, twin brothers who once sued Mark Zuckerberg for allegedly stealing the idea behind Facebook from them when they were all students at Harvard. After settling that lawsuit for millions of dollars worth of Facebook stock, the brothers began investing in Bitcoin startups. They announced plans to create a Bitcoin ETF in 2013, and their proposal has been working its way through the SEC ever since.
But the SEC wasn’t impressed with the proposal. The law requires the SEC to make sure that a newly traded asset existed in a well-regulated market that adequately protects people from manipulation and fraud. But the SEC saw little evidence that these conditions were met. Bitcoin is primarily traded in unregulated markets located overseas, especially in China, and as a result, the price of bitcoins is extremely volatile. In the SEC’s view, Bitcoin exchanges are not yet mature enough to justify opening them to the general public.
“This creates a chicken-and-egg problem,” says Jerry Brito of the pro-Bitcoin Coin Center. “How do we develop well-capitalized and regulated markets in the US and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?”
Analysts expected that SEC approval for the Winklevoss proposal would send Bitcoin’s price soaring, as millions of ordinary investors suddenly had an easy way to buy into the Bitcoin market. That expected rise was likely priced into Bitcoin’s price ahead of the SEC ruling, which would explain why a negative ruling led to a plunging value for the cryptocurrency.
Even after the latest turmoil, however, Bitcoin’s value is way above its level in the past couple of years. A year ago, you could buy one Bitcoin for only about $400. Now it’s almost three times that value.
Using Google Trends to Detect Bitcoin Price Bubbles
Willy Woo is an entrepreneur, angel investor, derivatives trader and cryptocurrency enthusiast.
In this guest piece, Woo discusses the recent run-up in bitcoin price, and the methods he uses to determine if and when bitcoin is overvalued.
Simply put, Google Trends is a great way to track the growth of active bitcoin users.
The search 'BTC USD' serves as a proxy for the engagement of active bitcoin users as they check the daily price. In the chart above, the baseline denotes the exponential growth of active users, while the height above the line illustrates their engagement levels.
When engagement levels run high, bitcoin users are in party mode, checking the price daily of their precious coin. If engagement levels are too high, that's when we are in a price bubble, and it's a good time to sell.
Conversely, when engagement is at a low (marked with green dots), this is a good time to buy. Put together, Google Trends is a pretty reliable buy and sell indicator.
So, what does this say about the recent run-up in price?
Here, we can see bitcoin is not in a bubble, and that there is likely still plenty of room for our current bull run to continue.
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