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Analysis

Friday Inferno market update

The rally just doesn’t end.

 

Bitcoin hit $6,300 a few hours ago, smashing through the immediate resistance that many analysts expected to drive it lower in the coming days.

 

Technical analysis states that support on the way down becomes resistance on the way up, and there has never been a support level like $6,000 in bitcoin’s entire history. Price bounced here many, many times in 2018. Tens, hundreds of millions of dollars changed hands. And then the level finally broke.

 

On the way back up, we would expect a similar pattern – multiple tests of $6k, with reverse ‘bounces’ downwards off that ceiling after each. Or, at the very least, one test. But it was not to be. Bitcoin sliced through it like a hot knife through butter. This has confounded many analysts. Bitcoin’s price broke $6k only yesterday, closed above it on the daily, and then kept going this morning.

 

Now, we’re not out of the woods yet. There is a wide band of resistance around the $6k region. In 2018, price dipped as low as $5,700, but a lot of BTC changed hands around that $6-7k level. Closing here on the weekly would be excellent news, but we can’t really consider this resistance band overcome until bitcoin closes above about $7,000. But the fact that it didn’t even pause at $6k is incredible.

 

We need to watch carefully what happens next. If BTC pushes higher, then there’s really just clear blue sky to the upside. $10k would be a reasonable target – and that mainly because it’s a psychological barrier.

 

However, a pullback would not be a surprise at this point. Daily RSI is over 70. Weekly RSI is approaching 70 for the first time in almost 18 months. Both can remain over 70 for an extended period, but after such a remarkable rally, we cannot discount the possibility of a fall back to $5k, and if that doesn’t hold, then $4,200. That would repeat the pattern of 2015, and that is quite reasonable to expect. But bitcoin doesn’t like playing to a rulebook, so don’t get caught out. There have already been too many surprises this cycle – and the uptrend is just 5 months old.

 

Earlier this week, Galaxy Digital CEO Mike Novogratz predicted $20k BTC by 2020. At this point, that appears to be easily within reach, and rather on the low side.

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Tuesday Inferno market report

TL;DR Trending up, and up, and…

 

This morning bitcoin’s price hit another yearly high of $5,970. That’s pushing well into the strong resistance band around the $6k level and shows a very impressive performance. BTC has almost doubled in price from its low of $3,122, and last week closed above the 50-week MA.

 

Volumes overall are up on last month, which is a bullish sign – it means that interest is returning to bitcoin. We also have Consensus coming up on 13-15 May. This is a major conference in the crypto world that brings together some of the biggest names and projects in the blockchain space. It is often used as a venue for big announcements and debuting new products. The conference has traditionally been accompanied by the ‘Consensus pump’, which sees BTC rise by an average of 77% and alts by over 160% in the weeks immediately following it. However – last year broke the pattern, no doubt as a result of overwhelming downward pressure in the severe bear market. Neverthless, expectations this year are high. If the Consensus pump happened again – and if it occurred to the same extent – it would see bitcoin pushing $10k by July.

 

Against all this bullish sentiment, we were seeing some bearish divergence on the daily RSI. This may have been invalidated by the most recent move up, but we’ll need to wait for the day’s close to know for sure. If bitcoin heads downwards it will strengthen that pattern. We also have to be mindful of the degree of resistance that will be found between $5,700 and $6,300. Most analysts are skeptical that bitcoin can break this at first try. Then there’s just the fact that we’ve had a solid uptrend for many weeks now, and it’s time for a correction.

 

In short, it’s very clear that momentum is returning to bitcoin. We know from experience that this market can turn around in a second, but finally, the fundamentals seem to be filtering through to price. We’re confident that 2019 will prove an amazing year for bitcoin.

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Friday Inferno market update

Will we smash resistance or find a double top here?  

 

At the time of writing, it looks like we may have a new yearly high incoming for bitcoin. Strong gains yesterday pushed BTC up to $5,600 once again. The market appears to have simply shrugged at the Tether/Bitfinex bad news, essentially ignoring the fact that USDT is now not fully backed by dollars (the irony to the whole episode is that it proved that, all the time the community was clamouring about Tether running a fractional reserve, they were actually fully capitalised).

 

There are now two scenarios:

  1. We form a double top here, in the $5,600 region, and head lower. This could bring prices back to support at $5,000, or potentially back into the $4k range. After that, there would naturally be questions about revisiting the lows of $3,100 or the 200 weekly moving average – but that would be some way down the line.
  2. We push upwards into the heavy resistance that exists in the $5,700–$6,000 region and above. Should bitcoin close above $6k, and ideally $6,300, this would prove extremely bullish.

 

Both scenarios are possible, of course, though we are leaning towards the more bearish one – for the simple fact that markets tend to follow broad overall patterns. It is quite natural that there should be a pullback after such strong gains, and approaching such heavy resistance: traders will be cautious and there will be some profit-taking. There is bearish divergence on the daily chart, with RSI (momentum) heading lower as price moves higher. A (bearish) head-and-shoulders pattern that was forming on the daily may now have been invalidated by the last green candle, but we will keep a close eye on it – should the right shoulder form then it would signpost a leg down.

 

Against all this, we are clearly seeing bullish sentiment from all quarters. Shorts are climbing, which shows traders are looking to profit from a downward move but also opens the door to a short squeeze – pushing the market up into that critical band around $6,000. We are currently trading above the 50-week moving average. Closing the week above that would be positive.

 

TL;DR it’s a very exciting and critical time. Don’t get caught by the unexpected moves the market will undoubtedly make. Ensure you are prepared for bitcoin smashing $6k or heading back to $4k.

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Tuesday Inferno market report

BTC’s slide has paused, but the alts are taking a beating – but that’s not bearish for bitcoin.

 

Bitcoin has stabilised in the $5,100 region after Thursday’s Tether-inspired crash from $5,500 to $5,000. The fact that $5k held as support is encouraging, as is the fact that we have heard little more about Tether. Bitfinex denied there was a problem, drawing attention to numerous inaccuracies in the Attorney General’s report – without denying the issue at stake, the misappropriation of $850 million. While BTC is trading at a premium on Bitfinex, the market overall is showing an unexpected degree of confidence in USDT.

 

As a result, bitcoin is holding above support, and has done since the weekend. There is now the chance of a ‘Bart’ back up to $5,600 and potentially the first test of the $6k area since November. Alternatively, the scenario is a drop down to the mid–$4k region, possibly testing $4,200 – which would be harsh, but actually positive and healthy for bitcoin. When markets break such key resistance, as bitcoin did at $4,200, they need to backtest that area as support to confirm that the bottom is in and the uptrend has started.

 

For the alts, however, it has been a different story. Alts have seen heavy losses across the board. Almost every single one of the top #100 coins is in the red for the week, with many posting double-digit losses or worse.

 

This is, again, encouraging. BTC is holding steady, while alts are dropping. This means that alts holders are selling for BTC, and presumably holding that in anticipation of the next rise. Alts as a whole have fallen to their lowest in a month, shedding $15 billion from their high above $90 billion at the start of April.

 

All of this suggests that BTC is positioning for a big move. Today is the last day of April, and traders will be watching for the close of that monthly candle.

 

May is going to be interesting, for sure.

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Inferno Saturday market update

Yesterday we focused on the Tether and Bitfinex news that pushed the price of bitcoin down by 10% at one point – and alts much further. As a follow-up, we’ll look at the state of the markets and give a more technical view of what’s going on.

 

The pattern of activity from recent weeks looks somewhat similar to the one at the end of the bear market in 2015: an immediate bounce after the crash to the low ($155 in January 2015, $3,100 in December 2018, both of which coincided with 200 WMA), a more gentle retest of that low and the 200 MA, a sharp rise above prior resistance ($300 in 2015, $4,200 in 2019) to a higher high ($310 in 2015, over $5,000 in 2019), and then faltering at the 50-week MA and…

 

At this point in 2015, the price fell to once again test the 200-week MA. For 2019, that final step has not yet been written. It is worth noting, though, that the Golden Cross (200 and 50-day MA crossover) was quickly followed by a Death Cross, before the second Golden Cross heralded the new bull market. We have recently seen a Golden Cross in bitcoin for the first time since 2015. Can we expect the same scenario to play out?

 

It’s also interesting that in 2015, the immediate catalyst for the fall from the 50 MA was a round of FUD caused by the ‘stress test’ (attack) on the network that was an early feature of the scaling debate (which ultimately resolved in SegWit implementation). At the time, there were questions about the overall sustainability of Bitcoin, and these concerns gave traders the catalyst they needed to sell. The market wasn’t ready for an uptrend at that point, but needed an excuse. Something very similar may have happened this time with Tether and Bitfinex. History doesn’t repeat, but it does rhyme.

 

Looking at other technicals, we see bearish divergence on the daily RSI – price had been going up, but RSI (momentum) falling. We might well expect that to continue since bitcoin was clearly overbought. While $5k currently remains intact, a bullish scenario would be a retest of the $4,200 support that was resistance only last month. If that holds, it would be a very positive sign. If not, then we could see a return to lower levels including, potentially, that 200 WMA once again.

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Friday Inferno market update

It’s happened. Finally. And it’s still happening. Hold onto your trousers, people.

 

And thus did it come to pass, that the shadowy demon known as Bitfinex did purloin the reserves of its Evil Twin, Tether. And USDT did become unTethered and traded at prices somewhat different to the $1 claimed by Tether, which was hardly unsurprising given that $850 million had gone walkabouts from their coffers.

 

And their acolytes did get the hell out of Dodge and sell their stinky Tethers pronto, and all the crypto traders in the land did bail out of bitcoin and alts, and all coins did slide most rapidly towards the Abyss.

 

What the markets say

So far, the slide has been no more than a modest 9% or so, which isn’t really so bad when you consider what bitcoin is capable of. The four-hourly candle late last night registers a $500 drop, before a bounce. We’re going to assume for the moment that it’s the kind of bounce a dead cat performs when dropped from a great height, because this round of FUD is definitely not over.

 

So what happened?

For background, take a look at this article from Fortune. The short version seems to be that Bitfinex’s payment processor, Crypto Capital, was taking a very long time to process withdrawals, meaning that a large amount of money was locked up with them. Very large.

 

To cover the shortfall, Bitfinex raided the Tether account of $850+ million, ‘backing’ those dollars with a line of credit.

 

So what next?

All of this has been a long time coming. Here at Inferno we have constantly warned that Bitfinex and Tether’s opaque approach to their reserves and the fact that the two companies are essentially the same represents a fundamental conflict of interests, and may be masking serious fraud.

 

Now, the cat is out of the bag. The New York Attorney General’s filing states that Bitfinex used Tether funds to pay customers who needed withdrawals, and never disclosed the $850 million problem to their users.

 

Well, all bets are off, really. We don’t know how systemically serious this might be, and so what the end result might be in fundamental terms. We also know that crypto markets can be highly emotional, capable of overdoing both the selling and the buying. But we also know they tend to shrug off news they don’t want to hear.

 

In short, this could be as bad as it gets. Or it could get a lot worse. Hedge accordingly.

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Tuesday Inferno market update

BTC continues to perform strongly, with more and more analysts agreeing the bottom is in.

 

This week once again saw a strong performance from bitcoin, which has now pushed higher to meet the $5,600 resistance level. This is a key area because bitcoin paused here – albeit briefly – on its slide from $6,000 down to $3,100. This was the ‘last stand’ for the bulls on the way down back in November, and it could be the last stand for the bears now.

 

Most analysts now agree that the bottom is in for BTC, based on a range of different factors. Bitcoin is now up 75% from its December low. For the bulls, the next major area of resistance to overcome is that $6,000 line where BTC spent so much time consolidating last year. Once that has been broken, there is the likelihood of much more interest coming in from the sidelines.

 

However, this is bitcoin and so it is always worth keeping an open mind. The bull markets can run longer and higher than most traders ever expected, and so can the bear markets. At least a couple of notable traders believe that we are still in for another leg down. Tone Vays has warned that this is a bull trap, and is targeting sub-$2,000. Alessio Rastani, meanwhile, notes that markets ‘are generous with second and third chances’ to buy the lows, though stingy with fourth and fifth chances. He is expecting a retest of the 200 WMA and potentially the $3,000 level. Though this may seem impossible at this point, the 2015 bear market and post-capitulation consolidation provided just such opportunities, with returns to the low of below $200 multiple times – if not the final capitulation low of $155.

 

The alts have been a mixed picture, with most posting USD gains but dropping against BTC, as traders sell in anticipation of greater rises for bitcoin. BAT enjoyed a very strong week before Easter on news of a new release of the Brave browser with key new functionality, and at one point had almost tripled in BTC terms from its bear market low to close to an all-time high in bitcoin prices (and 400% in fiat), but has now pulled back. Alts in general have done very well over the past weeks, as confidence returns to bitcoin and traders snap up oversold coins. While bitcoin has posted 75% gains, many alts have seen two or three times that. Litecoin, for example, bottomed at around $23, and is now trading at close to $80. What BTC does next will set the context for whether its time to call it Alts Season.

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Inferno: Long-term market report

It’s the Easter holiday, so we’ll take a break from our short-term market analysis to look at the big picture.

In our opinion the picture for bitcoin is more uncertain than ever for the short term, good for the medium term and excellent for the long term.

 

The context for short-term uncertainty is that single huge buy of 20,000 BTC, which took place suddenly after 15 months of the bear market. When BTC abruptly trades $1,000 higher, you have to be mindful of the possibility it will crash just as fast. At the same time, this did paint a higher high, and a degree of confidence has returned to the crypto market as a result. Traders are balancing their disbelief that this happened and that it could continue with their growing optimism.

 

In the medium-to-long-term, of course, we believe that bitcoin has a bright future. Whether the bear market has ended or not, it’s closer to the end than the beginning and all the indications are that adoption will continue apace in the coming years.

 

There are several zones of interest for the coming days and weeks:

  • The $4,900-5,000 area, which has acted as support since the move up, and will act as resistance if price drops below it.
  • $4,200: the major resistance that BTC broke at the beginning of April to create a higher high. A retest of this level as support would be potential confirmation or invalidation of the new uptrend.
  • 200-weekly moving average retest. This will doubtless be a strong buy zone, from around $3,500 down to around $3,200.
  • Lower than $3,100 – our previous low for this cycle – and we can expect a drop into the $2,000 range and another leg down for the bear market.

 

Major analysts are split between different scenarios, with some bullish and some bearish, and some still holding to their belief that sub–$2k prices are likely.

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Tuesday Inferno market update

Last night saw a slide below $5k, followed by a bounce. Are lower price coming for BTC?

 

After an extremely bullish week at the start of this month, the last weekly candle closed on Sunday as a doji: a candle with a flat body, indicating a narrow trading range, and wicks up and down.

 

Dojis typically signal indecision, and that’s exactly what we’d expect after a $1,000 rally through multiple support lines. Many traders will be taking profit, disbelieving that prices can go higher in the near term. Others are convinced the bull market is on. The market is at a point of inflection, and once again it’s decision time. This kind of situation also calls for extreme caution on the part of traders, who risk being burned heavily if they make a wrong move – or converserly, profiting handsomely if they call the market right.

 

Last night, BTC sold back down into the $4,900 range, as it has done several times now, bouncing off a gently-rising support line. The last few 4h candles have show rising price on faltering volume. At this point, indications are still that the market favours a downward move. RSI on the daily is still close to the 70 (overbought) area.

 

Against that, we are clearly seeing a measure of confidence return to the crypto markets, and a Golden Cross is looming as the 50-day moving average rises to meet the 200-day moving average. BTC is currently trading above both, which is theoretically bullish.

 

However, we are still wary after that huge spike in price, brought about by just one large buyer. It’s entirely possible his motives were bad: to manipulate the market into thinking the bullrun was here, then sell the coins he had bought at the top. At the moment, we simply don’t know how this will turn out. The overall trend is unclear.

 

In other news, Binance has announced it is delisting BSV following Craig Wright’s legal action against @hodlonaut, and Calvin Ayre’s insults towards the exchange. Several other major crypto services have joined Binance and stated that they will no longer be supporting BSV.

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Friday Inferno market update

It’s been quite a fortnight, but we’re now staring at a moment of choice for bitcoin.

 

After last week’s incredible spike upwards, we might have expected bitcoin to correct immediately. In fact, after some initial volatility, it actually pushed higher – topping $5,466 (Bitstamp) on Wednesday afternoon.

 

Given that all the indicators on the longer-term timeframes were already screaming overbought, this was remarkable. Predictably, it was only a short-term move to the upside, and yesterday saw the sell-off we expected from that, bringing the price back down to its current level of just over $5,000.

 

This a key line for bitcoin, since that original move higher took BTC above $5k. The question now is whether it will hold onto gains, or whether it will retrace further – potentially a lot further. There’s a case for suggesting we will retest the $4,200 line that proved strong resistance, and that may be support now. If that fails, then there is a serious question mark over whether the bear market is, indeed, over. If BTC falls back into its previous range, then this looks like a manipulation spike (powered by that mystery 20,000 buy) or the end of a fourth wave in an Elliott wave cycle – with a final fifth wave to play out lower.

 

Leading analysts are divided on this. Tone Vays is bearish, still expecting sub-$3k prices and a bottom sometime in the autumn. Alessio Rastani is similarly bearish, having called for a relief rally to $5,000 before this happened. Others like Willy Woo and Murad Mahmudov believe the bottom is in for bitcoin.

 

Right now, at the time of writing, BTC is holding $5,000 – just – having dipped below it recently. Despite the fall from almost $5,500, RSI for the daily has only just dropped out of overbought territory, indicating just how significant that move higher was. 50 and 200 moving averages for the daily are converging, and a ‘Golden Cross’ (the opposite of the Death Cross we saw last April) will occur in the near future unless there is another significant move to the downside. Price is currently well above the 200 MA.

 

It has been a tough week for alts, with heavy losses, powered by BTC’s falls. Alts traders are clearly looking to BTC for cues about the direction the market will take, and hedging for what they believe may happen next.

 

And whatever happens next will be significant – whichever way the market decides to go.

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