Will Bitcoin extend its losses before bouncing upward?
In the last 24 hours, the Bitcoin’s price has declined just under 0.7%, falling to $458 from the $470 level. The price action has recently tested an important Fibonacci support level at $457.19, but did not manage to close below this level. A move below this level should see a decline to the mid $400 level at $455. However, if the Fibonacci support level holds, the price should remain in the $460-$470 range.
The Isle of Man has embraced Bitcoin and aims to become a global centre for crypto-currencies, but recently there has been reports that the Capital Treasury Services will be withdrawing support for crypto-currency companies due to a lack of support from the wider financial sector. The accounts of those companies involved in the crypto-space will be closed next month. The consequence of this is that the entrepreneurs, innovative activity and future economic benefits will be located elsewhere. Previous to this development, the Isle of Man was a serious contender for being a Bitcoin/crypto-currency hub.
The risk of Bitcoin relating to computer security may be a reason behind the recent price decline today. In Australia it has been reported that hackers have frozen and locked more than 20,000 computers by malicious software. The software asks users for a Bitcoin ransom to unlock the computer. Backing up files is an important lesson to be learned for Bitcoin users as this would provide a solution in circumstances such as these.
Moving on to the technical analysis, the 4 hour chart is shown below with the Ichimoku cloud and relative strength index. The price has continued its downward trend that was initiated yesterday. Any price rises will be tempered by the cloud, which will act as resistance at the $470 level. The relative strength index indicates that oversold conditions are strengthening, increasing the likelihood the price will correct itself in the upward direction.
The daily chart is shown below with the Bollinger Bands®. The selling volume has decreased over the past few days, indicating that sellers are becoming exhausted and that buying pressures will dominate in the next few days. The price should post a low of around $455, the level of the lower Bollinger Band® and after that it is expected the price will rise, tending toward the middle band at $477.68.
The 1-week forward contract for Bitcoin on the OKCoin exchange at the hourly timeframe is shown below. Selling volumes are also declining, indicating a reversal may soon occur. The forward price could decline as low as $460 before bouncing upward. The stochastic also indicates that a reversal will occur soon. The stochastic is entering oversold conditions and the price can continue to extend losses, most likely to $455, before rebounding, as buyers use the opportunity to purchase Bitcoin at low prices.
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