Thursday, February 23, 2017

Bitcoin price analysis February 23, 2017

Bitcoin Rallies Ahead of Bitcoin ETF Decision

This week the price of Bitcoin rallied from $980, past $1000 to a monthly high at $1127, inches away from the $1139 high of January 5. This strong run was partly fueled by speculation on a the Winklevii Twins’ proposed Bitcoin Trust ETF. On March 11, 2 members of the SEC will rule on whether to approve or reject the application. With as much as $ 300 million expected to flow in if approved, lofty $2000 targets are on the table. This week’s rally was either pricing in approved ETF news (on insider’s knowledge), or it was, and is, a massive pre-ETF pump that dumps if the ETF is declined.

On last week’s analysis, I expected a sideways consolidation within the $980 – $1020 range. But the market proved me wrong. Over the past 7 days, price has broken past $1000, rallied up to a local $1066 high, corrected to a shallow $1039 bottom and is now seems intent blowing past an 18 month high.

Looking at the 1 hour and 2 hour chart, this rise up to $1134 on BitFinex is part of an unfolding 5 wave structure from the $974 bottom of February 13. The chart above labels this bottom as 2, a retracement of an impulsive wave 1. Wave 3, ongoing as at writing this, follows wave 2 as an impulsive wave, and should continue up to a peak price; perhaps $1134 further up past $1139..

Thereafter, a corrective wave 4 retracement follows after wave 3 peak, finds a bottom, before a last impulse wave 5. As as writing this, on the 6 and 12 hour charts, bitcoin is trading at $1127, still within a wave 3, so further upside could materialize. Even after wave 4, a 5th wave should inch higher or even break past $1139 high. Bullish hopes of breaking the all time high are certainly warranted, for now.

On this 3 day chart, another 5 wave structure is in force. This is a higher degree fractal – a self similar pattern appearing at every degree of a trend. The $1139 high was the peak of wave 3, that retraced down to $735 for a 4 bottom and has resumed a trend up in a 5th wave – the final leg in the direction of the dominant trend.

Wave 5 is typically terminal, and precedes a 3 wave a-b-c corrective wave in the opposite direction of the dominant trend. The current wave fractals will be no different, and is only a matter of time. The question is how far up will price overshoot?

From talking to traders, potential targets for a wave 5 top on the weekly and 3D are $1200, $1400, $1600 and $2000.

This means immediately after this peak, a 3 wave structure will correct to at least $750, the wave 4 bottom. This is why I am cautious at these price levels. While it looks bullish, the events after a top could quickly turn bearish. Watch out for either a bull trap or a bear trap

If indeed the ETF fails approval, then any ensuing correction down will be catalyzed by this news. If approved, then the anticipated $300 million expected to flood into COIN ETF will fuel a massive price rise.

Bitcoin ETF for Dummies

Spencer Borgart, of Needham & Co., expects the COIN ETF will not be approved, and will either be rejected or a proposed rule change, necessary for the ETF will pass by virtue of expiry of the March 11 deadline. Needham’s mini statement to investors in January stated it had a ‘very low’ probability and was drastically ‘overstated’ with odds below 25%

“the confluence of fear, uncertainty and doubt coupled with basic incentives at the SEC will make it very difficult to get approval.”

He is not the only one. Insider Vinny Ligham tweeted

“So far so good when I posted this at $810. Doubt the ETF decline (likely outcome) would even push it down this far [$700].”

ETF.com ‘s Bitcoin ETF for Dummies is a great interview with Spencer and explores the Bitcoin Trust ETF.

“I definitely don’t expect a crash. There would be some downside to disapproval. We’ll see price slump a bit, but I would guess it won’t slump more than 10%.”

I expect the ETF will not get approved.

Bitcoin Weekly Price Forecast

This week, I expect price to push further upside and break the all time high. I expect a wave 4 correction on the 1 day and 12 hour chart.

Beyond that, my gut feel says this run up is a fool’s trap: smart money exiting while dumb money takes the bait. With the looming ETF decision at large, a break of the high would suck in more late buyers and possibly drag this final 5th wave further up

My main concern is a top, and what form it might take, in anticipation of a break downwards. I still maintain a retest to $700 is inevitable. I too have been surprised by the energy of this recovery from $754, but, the more i ponder and stare at charts, the more i am convinced whatever top we get, will precede a 3 wave A – B – C correction to at least $700.

Contact this author via bitcoinmarketanalyst@gmail.com

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