Bitcoin has reached an intersection of sorts, caught between positive and negative forces both fundamentally and technically.
On the positive side, Bitcoin's technology is improving. The cryptocurrency's network is integrating SegWit (Segregated Witness) into its platform. SegWit will enable a separation of signature data from transactions, providing more space for additional transactions on the blockchain. This will allow for a more efficient transfers, which in turn will lower fees.
However, on the negative side, regulators (who are still cleaning up the recent financial fiasco that was the binary options industry) are taking no chances with cryptocurrencies, making sure every necessary precaution is considered. Over the past few months, digital currencies have subject to character attacks from a wide array of sources. Attackers have include financials such as UBS, S&P Global Ratings and Yves Mersch, an ECB senior member, who advocated clamping down on cryptos.
Earlier in the month, Augustin Carstens, general manager of the Bank for International Settlements (BIS), also known as the bank for central banks, as it holds their accounts, called Bitcoin a “combination of a bubble, a Ponzi scheme and an environmental disaster.”
Adding to the mounting list of crypto-naysayers, today, Bank of England Governor Mark Carney told students at London Regent’s University that Bitcoin has failed to qualify as currency since currencies are measured by two essential criteria: they must be a medium of exchange and a store of value – both of which Bitcoin lacks.
Technicals: The Bears Have Brought Reinforcements
On the positive side for technicals, BTC has been trading within an uptrend for two weeks, since February 6.
However, Bitcoin has been trading within a downtrend since December 17 when it was at its all-time-high near $20,000. It has reached and even crossed above the channel-top. However, it scaled back into the falling channel, forming a bearish Shooting Star, demonstrating that the bears intend to guard their line-in-the-sand that is the upper bound of the falling channel. The bears have also brought reinforcements.
The 50 dma (green) has been realigned with the bears by the upper bound since late January. It added – or rather revealed – its resistance. The 100 dma (blue) just joined them with the 50 dam at the channel top. The fact that the 50 dma crossed below the 100 dma also demonstrates that price momentum is to the downside.
There is also a clear line of support-resistance at the $12,000 level since late December.
Trading Strategies – Short Position
Conservative traders might wait for a downside breakout of the congestion above the $10,000 key level.
Moderate traders may wait for a close of a Shooting Star.
Aggressive traders may short immediately.
Equity Management
There are many trading strategies available for the same instrument in the same time. A trader must establish a plan, which would include his resources and temperament. This is crucial and determines success or failure.
A classic risk-reward ratio is 1:3. Therefore, entries and exits must be determined accordingly.
Stop-Losses (above levels):
- $11,658 – high of today’s Shooting Star
- $11,946 – 100 dma
- $12,000 – psychological round-number and support-resistance level
Targets (below levels):
- $10,400 – range bottom
- $10,000 – psychological round-number
- $9,000 – January-February support-resistance
- $8,400 – 200 dma (red)
- $6,000 – February 6 trough