On Friday, Bitcoin hit the one of its lowest levels since the beginning of November, reaching as low as 5,708 USD. The drop caused worries, as a number of analysts rushed to compare bitcoin’s course with the dot-com bubble, as its fall neared similar levels.
A comparison was also made to other “similarities” and was extended to arbitrary conclusions, like as the internet did not go away after the dot-com bubble, so block chain will not go away after a bitcoin bubble.
At this point, we would like to state that we do not share these views and consider each case by its own merits, as there are also a number of differences between the two.
Also in our opinion, the burst of the dot-com bubble does necessarily constitute comparable levels to bitcoin, meaning that bitcoin may very well rebound or drop even further in the future. However, if one point could be a take away from the whole argumentation, that would be the normalization of Bitcoin as an investment asset.
Signs of such a normalization were given once again yesterday, as the Swiss Crypto market may gain full access to regular banking services until the end of December, this year. The news seem to have sparked new hopes and optimism among investors as Bitcoin’s prices rallied for a short period yesterday reaching a level of trading, higher than 6500USD the same day.
Bitcoin’s rally was followed by its main rivals, namely Ripple, Litecoin and Etherium. The news sounded even more promising as according to media, Heinz Tännler, finance director of the Zug canton, quickly added that “other jurisdictions such as Malta and Singapore are very active and make a lot of effort to attract these companies” and that the “lack of access to bank services is a significant competitive disadvantage”. He also added that Switzerland’s central bank (SNB), financial supervisors and government “are willing to help”.
We consider the news as a game changer for cryptocurrencies as the normalization process would make an extensive leap forward, should the banking services be fully available to crypto traders.
We also see the case that Facebook’s easing on ads relating to crypto’s in the past week had already started to fuel hopes of investors. The easing seems to apply for crypto’s but does not apply for initial coin offerings, making a very interesting categorization. The arguments for further normalization of crypto’s could be strengthened by Facebooks’ decision, as it also assists further expansion of bitcoin trading terms. Please note that the above applies not only to bitcoin but to the whole crypto-market.
An interesting statistic also was released recently, by PWC (strategy and consulting division) and the Swiss Crypto Valley association, which indicates that digital currency sales hit a 13.7 billion USD in the first five months of 2018. According to media, the amount derived from 537 initial coin offerings in 2018, surpassed last year’s total of 7 billion USD. Such a statistic could imply a promising activity volume for the crypto-market in the future.
As an epilogue we would like to mention, Bank of England’s recent warnings about crypto assets, towards banks and insurers. The warning brushes a darker shade to the overall crypto picture. The warning reminded, that crypto assets could be highly volatile and vulnerable to fraud and it should be considered as another note in a long list of warnings deriving from a number of regulators throughout the world. Overall, events highlighted in the above report seem to draw a rather rosy picture for the crypto-market, however we would like to share the view that the crypto-market’s road towards normalization may prove to be a bumpy one, with lots of ups and downs and maybe further depreciation of Bitcoin’s value in the longer term in order to become a reliable investing instrument
Bitcoin’s price action broke the clear downward trend line incepted since the 8th of June on Monday with a positive opening gap. Monday’s opening shooted the coin’s price from one of its lowest levels in 2018, namely 5710 USD, to over the psychological level of 6000USD, reaching 6280 USD. The crypto currency got a second boost the same day breaking the resistance level of 6320 (R1) and even surpassing 6500 USD, correcting somewhat on Tuesday.
The crypto currency could continue to trade in the sideways motion for some days resting between the 6300 (S1) support line and the 6700 (R1) resistance line, before its next move. Please note that some bearish tendencies are possible as it may have further corrections.
Moreover technically, it should be noted that the RSI indicator in the 4 hour chart, constantly touches the reading of 70, implying that the long position may be overcrowded. In addition, we would like to point out that the price action tests the 100 moving average (MA), while the spread between the 100 MA and the 200 MA has widened in the past few sessions, while it stabilized and slightly narrowed on Monday and Tuesday, reflecting the rising prices, as the 100 MA reacted faster than the 200 MA.
Should the bulls take over the market we could see Bitcoin breaking the 6700 (R1) resistance line and point for the 7000 (R2) resistance (and psychological) barrier.
On the other hand, should the bears be in the driver’s seat we could see the coin heading south breaking the 6320 (S1) support line and aiming the 6070 (S2) support hurdle.
Bitcoin 4 hour chart