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Analysis

Friday Inferno market update

TL;DR violent moves but still range bound, waiting for a breakout.

 

As we reported on Tuesday, bitcoin had spiked higher, back above $4,000, and was forming a potentially-bullish falling wedge. The move also lifted BTC above the key level of the 50-day MA. Looking on the daily chart, price has not stayed above the 50 DMA for more than a few hours or days at the most since August, so this could have been meaningful.

 

However, the wedge was invalidated after a failed upside breakout, after which it became increasingly clear that the momentum was going to be to the downside. $3,800 swiftly followed – right where the 50 DMA currently stands – and then another red candle down to $3,600, with a brief wick down to $3,500.

 

It was a heavy fall, over 10% in a day, but right now bitcoin is still stuck in a range. Zooming out to the daily, we see a band between around $3,600 and $4,100 where bitcoin is currently trading and has traded in the recent past. Bitcoin has made a series of lower highs, and was unable to break resistance at $4,250. Meanwhile there is (for now) relatively strong support at $3,600 – as this last dip shows.

 

Taking a longer-term view from the weekly chart, we can see a cross of the 50 and 100 WMAs is looming, which would be a further bearish signal. That will likely happen towards the end of January. Since we never tested the 200 WMA on volume, we also expect that to occur in due course – forming either a double bottom or sending us into the next phase of the bear market with sub–$3k prices.  

 

Meanwhile, it’s not all bad news. Daily transactions on the bitcoin network have reached a yearly high. Apparently, around 20 percent of these txs come from VeriBlock, and are used to secure other blockchains using Bitcoin’s massive network. Attacks on smaller PoW networks – most recently Ethereum Classic – show the utility of this approach. The state of altcoin blockchains is recorded at regular intervals on a more robust and tamper-proof ledger. It seems that Bitcoin is carving out for itself yet another use case.

 

In short, the long-term fundamentals are strong, while in the short-term sentiment is driving price action. Watch $3,600 and $3,200 closely.

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Tuesday Inferno market update

TL;DR We’ve seen $4k again for the first time since Christmas Day. Is the bull back?

 

After a lacklustre start to 2019, with volumes dropping, Sunday night saw a sharp uptick to $4,090 (Bitstamp) as bitcoin powered $250 higher in a single hourly candle. Given that it’s been two weeks since we fell out of the $4,000 range, that’s good progress. It’s also above the 50-day moving average, which hasn’t happened since early November (and that was a bull trap). As ever, though, we need to be cautious: this is a critical time, as the market makes up its mind whether the bull is back or whether we need to drop lower for final capitulation first.

 

Over the past few weeks, since it crashed through support at $6k, bitcoin has been extremely volatile due to the lack of historic support and resistance in the $3-6k range. New support and resistance levels have gradually been formed as price discovery takes place. We now know there is strong support at $3,200 and further good support at $3,600. However, there is also significant resistance at $4,250, and that’s what we’re targeting next. There’s further resistance at $4,600. Higher still there are going to be significant barriers, but one thing at a time.

 

Bitcoin has managed to hold around $4,000 and is forming a falling wedge. These are bullish more often than not; should it break to the upside we’d expect to push through the immediate resistance at $4,250 – which would then become support.

 

Zooming out to the daily, we may have a bullish inverse head-and-shoulders forming: a reversal pattern. There may also be a tentative cup and handle, also bullish. Either way, we’re really looking for a break of that $4,250 resistance and close above it for greater confidence. Should bitcoin break lower, then we could well see a return to the bottom and a continuation of the bear trend. We should bear in mind that while breaking the 50-day moving average is good, we need to stay above it and consolidate gains – and ultimately push through the 100 and 200 DMAs (currently at $5,000 and nearly $6,000 respectively) to seal the deal. The last break above was a bull trap, and previous breaks above it this year have been rejected at the 200 DMA.

Lastly, Ethereum Classic has been in the headlines for the wrong reasons. The original Ethereum has been the target of a 51% attack, with successful double spends leading to the theft of 88,500 ETC, worth nearly $500,000.

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Friday Inferno market update

TL;DR 2019 begins with a whimper, not a bang.

 

This week has seen very little of real note in the bitcoin markets. Traders are still on holiday, volumes are still low, and the decisive move we need to know where things are headed has so far failed to materialise.

 

The overall picture is more stable than it has been recently, but still broadly bearish. We’re trading below all the major daily moving averages. The 200 MA has dipped below $6k, the 100 MA is approaching $5k and, most interestingly, the 50 MA now sits below $4k – adding another layer of resistance for price to surpass. This is in addition to the resistance that already lies around $3,900, where BTC appears to have just put in a double top. There are headwinds to higher prices, shall we say.

 

However, some consolidation is occurring and bitcoin has not yet dropped back below $3,700 – the first layer of support. Below that, we have stronger support at $3,600. Right now, then, we’re trading in a fairly narrow range that we can expect to break out of one way or another soon. If the break is to the downside, then we’re probably looking at a return to the lows around $3,200 and the 200-week moving average. (This report suggests that the 200 WMA is a fair baseline for BTC valuation, though there’s no reason we shouldn’t dip lower in the short term.)

 

While momentum is still downward, here are some bullish thoughts to close.

  1. Circle executed almost $24 billion in 10,000 OTC crypto trades last year.
  2. Ignore the all-time highs and look at the yearly lows instead. These signal the number of holders who will never sell, no matter what. Lows for each year are:
  • 2012: $4
  • 2013: $65
  • 2014: $200
  • 2015: $185
  • 2016: $365
  • 2017: $780
  • 2018: $3,200

 

Stay tuned!

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Tuesday Inferno market update

Happy New Year, Infernites! What a year it’s been, and what a year we’re going to have in 2019!

 

We start the year much as we ended the last one: in a holding pattern, waiting for this market cycle to play out one way or the other. In the last few days, we’ve seen an increasing number of people calling the bottom as bitcoin soared over 30% from its 2018 low of $3,122. Conversely, plenty of analysts see it as no more than a dead cat bounce and are waiting for the bears to take over once again.

 

Looking at the charts, it’s pretty neutral. RSI is reading a little oversold on the daily and 4h, but only just. There’s support at $3,600 we haven’t convincingly broken since the bounce from $3,100; equally, though, bitcoin has posted a series of lower highs after failing to maintain $4,250. Combine that with thin holiday trading volumes, and you have a powder keg for manipulation and sudden moves. Volumes have dropped off a cliff over the last week and so nothing that happens can be considered definitive until they pick up again, which will presumably happen over the coming days as the holidays end.

 

For a while, it looked like a bullish inverse head and shoulders was forming on the 4h, but that appears to have been invalidated as the price slips lower again, failing to breach the neckline at $4,300. Instead, a downward-sloping resistance line is becoming ever-clearer, with those lower highs providing a ceiling for price. To the downside, we also have the 200 weekly moving average, which has – so far – proven good support. We would expect that to be retested before the trend resolves one way or another. The last time it was hit, volumes were so low it cannot be taken as a price floor.

 

In short, it’s a waiting game. With the new year and new infrastructure we would expect renewed optimism, especially after a full year of bear market. But that’s not to say we won’t have one last shakeout first, or that the trend won’t continue a while into Q1.

 

The good news is that, after all the pain of 2018, it’s practically certain that 2019 will end better than it started.

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Saturday Inferno market report

Welcome to the weekend, and our very last market update of 2018!

 

Well what a year and what a month for bitcoin! We’ve plunged from the heady heights of $20,000 to plumb the murky depths of $3,100, testing the 200-week moving average that so many thought would be unassailable. We’ve seen volatility return after one of the longest periods of stability in bitcoin’s history, that extended snooze that took place right through September, October, and the start of November before the dump below $6k. We’ve read countless headlines of bitcoin’s demise, seen crypto ridiculed and heard the drum banged for ETFs and conduits for institutional money like Bakkt more times than we can remember.

 

And so, we come to Saturday 29 December, and our last market report of 2018. Where do we stand, and where are we heading?

 

Well, the bounce from $3,100 – a range where historical support meets the 200 WMA – was strong. It broke multiple resistance levels but faltered at $4,250. The pullback saw a drop of 15% and bitcoin hitting support around $3,600. At the time of writing, we’re right in the middle of that range between $3,600 and $4,200, at the 50% fib level. Volumes have dried up and – while there are no certainties here – a move to the downside seems most likely. We’re still trading below all the major daily moving averages, the volumes aren’t here to sustain this price, and there’s strong resistance above.

 

Moreover, we have unfinished business. The macro trend is still bearish. We touched that 200 WMA but we need to retest it again to establish a bottom – or to break through it and bottom out lower. As the year draws to a close, it seems clear that the bear won’t leave until 2019. We are still expecting at least one final, major crash, at the very least, with targets down in the mid-to-low $2,000s. After that, we’d expect some consolidation and a period of stability; exactly where will depend on where BTC finally comes in to land after its year-long descent. But we know that with bitcoin, things can change in a heartbeat. And we know that along the way there will be many false starts and shakeouts.

 

No doubt 2019 will be a brighter year for bitcoin. Before then, the volatility brings opportunity. As we’ve said before, the winners in the next cycle will be determined by those who hold their nerve at the end of this one.

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Inferno Christmas market update

Welcome Infernites! Our bi-weekly market report is a day late this week because, well, it’s Christmas and we were busy.

 

Last week saw an impressive bounce from the $3,100 bottom, but the rally failed at resistance. We’re now looking at retesting support – potentially at multiple levels – and then we’ll have more data on the state of this rally.

 

While the move up from $3,100 – roughly coinciding with that all-important 200 weekly moving average – was strong, puncturing several resistance zones, it faltered at $4,250. This level was established as strong support on the way down, and duly became resistance on the way back up. Right now we’re back below $3,800, leaving questions about how much further a fall is likely.

 

Strong rallies don’t come out of nowhere. They build a foundation, and that’s what we’d need to see here. We would expect a retest of $3,600 at the very least, and very likely the 200 WMA or $3,200 level too. That’s required to in order to know whether bitcoin is bottoming.

 

Since we did not see particularly high volumes last time the price was that low, we’re skeptical and still expecting a final move lower – but, as we know, bitcoin keeps us guessing. The new year is coming, with the promise of new infrastructure and new developments, and our hunch is that time is running out for the bear. He just might have a little more strength in him yet.

 

What’s indisputable is that bitcoin is showing signs of life. Even if prices are falling, volume is back. And overall, the new year is likely to be a good one for crypto.

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Friday Inferno market update

TL;DR Some very bullish moves. Will it end, and if so, where?

 

Bitcoin has staged an impressive recovery since it touched yearly lows. BTC briefly dropped below the 200 weekly moving average but recovered fast. It has not fallen substantially below the 200 WMA since capitulation in January 2015. This time, we saw a $3,122 bottom, and the week closed pretty much on that line, just below $3,200.

 

Then went on a tear, ultimately hitting $4,172 – a boost of 30% from the bottom. It broke multiple resistance zones, pushing through areas that might otherwise have proven tough to break. Since the bottom, we have seen five consecutive daily green candles. Moreover, volumes are coming back in after a decline.

 

So, what next?

 

It’s possible that bitcoin will continue to soar, staging another move up towards $5k. We might expect resistance at $5,200 or so if that happens. But right now, indecision characterises the market. So far, we haven’t managed to break strong resistance at $4,250. We have seen multiple doji candles on the 4-hour chart, with wicks both up and down: traders just cannot decide whether this is the start of something bigger, or too good to be true.

 

We see several reasons for the spectacular recovery from $3,100:

  • After such a dramatic fall from $6,000, a bounce was in order sooner or later.
  • The 200 WMA, broadly coinciding with $3,000 support, provided a good last stand and a reason to stage that recovery.
  • The ‘Santa Rally’: many traders will be covering their shorts so they can ignore the charts over Christmas. This effectively involves buying back BTC to close their positions.
  • There was increasing talk of incoming capitulation on Crypto Twitter, with ‘dumb money’ making assumptions of further falls to come. The nature of the market is to destroy such traders, doing exactly what the majority thinks won’t happen.

 

The alts, too, are seeing some serious green, particularly WAVES, which has hit almost $5 from its base at just over $1 a few weeks back. BCH almost tripled in price in just days.

Trading is incredibly high-risk right now. Those devastating falls over recent weeks have been matched by jaw-dropping rallies in recent days. We will see further falls – there is no doubt about that. Just as a correction from the freefall was in order, so is a correction from this bounce. It’s unknowable when that will happen, or where it will end. Whether BTC will drop below the 200 WMA, or whether it will bounce off support (perhaps at $3,600) and the rally will continue afterwards and attack $5k and then that all-important $6k line. It’s too early to say. But volatility is the name of the game, one way or another.

 

Stay safe, and happy Christmas guys!

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Inferno Tuesday market update

TL;DR A pause at the 200 weekly moving average and a bit of a pump, but the Trend is still down.

 

Bitcoin made new lows last week, dropping down out of its falling wedge and under $3,200. This is a key level, because it represents the 200 weekly moving average. Bitcoin has rarely ever traded beneath this long-term indicator, and the last time was around the end of the last bear market early in 2015.

 

Back in January 2015, BTC fell below the 200 WMA but the week closed above it, with just a long wick breaching that line. In this case, the same happened – we dropped a few dollars below it, as far down as $3,122 (Bitstamp) but ultimately closed above. The difference this time is that we did not see a characteristic capitulation spike, with high volumes. In fact, volumes are down, and the downtrend remains incomplete.

 

After numerous attempts to break old support at $3,250, which has proven strong resistance, bitcoin did leap higher yesterday, breaking not just one but two support levels. It faltered right where we’d expect, on strong prior support at $3,600. This morning it dropped back down below $3,500. Volatility and volumes are increasing again after a period of calm, shaking out those traders who finally think they’ve got the market figured out. But bitcoin chews them up and spits them out every time.

 

Should it push back up again to break $3,600, there’s further resistance at $4,600-4,700 – though that’s a long way from here – and ultimately the $5,700–$6k zone that proved so strong on the way down.

 

As we’ve noted before, this market keeps people guessing. When shorts pile up, a squeeze to flush them out is all too common. The price spikes upwards – over $350 in total yesterday – shorters who set their stops too low get margin called, and then price quickly drops again to continue its downward slide from where it left off. Ultimately, we’re still targeting down in the low $2k zone for the end of the bear market. We’d need to see dramatically higher prices on very high volume to call it over (as Crypto Twitter is doing).

 

One year ago today, bitcoin was just coming off its all-time high of $19,736. In other news, the Bear has been taking its toll. Substratum, a distributed computing resources platform, is running low on the ICO funds they collected last year. They have started daytrading what remains of their ICO money in an attempt to accumulate further capital. One response to their announcement was to suggest that they should short SUB…

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Friday Inferno Market update

TL;DR it’s on.

 

It’s Friday, and bitcoin is at once again at a yearly low. Having touched $3,200 overnight, there was a slight rebound, but the volumes are low and that move downwards was decisive. There’s going to be more. Nothing is for certain in this game, but we’re pretty sure it’s going down further. Bitcoin dropped out of that down-sloping channel we’ve seen in recent days, and it dropped below its previous yearly low – albeit by only another $10, at least at this point…

 

Bitcoin did bounce off the $3,200 line, as we might very well expect: that’s not only the last support level, but it’s exactly on the 200 week moving average, which many conventional traders will be paying a lot of attention to. Bitcoin has rarely, if ever traded below this line. We knew this was coming: take a look at our recent article on Moving Averages. A lot of traders would have picked that spot to go long.

 

For what it’s worth, we believe the 200 WMA will represent a bargain in the future, and it may be a long time before we get those prices again once bitcoin lifts back above it. But for now, we think it’s highly likely it’s going down. BTC will test $3k, and if that doesn’t hold there’s a massive vacuum in support right down to… where? $2,200? $2,000? $1,800? We’ll find out when we get there but once $3k goes, we’re going to see a dramatic loss of confidence. And while that’s scary, it also spells Opportunity.

 

Price needs to head lower before the trend changes. The reason we can tell that is that we have not yet had the volume that would indicate capitulation. Volumes have dropped off from their rise a couple of weeks back. We need a convincing move, and despite price being at yearly lows, there’s not a lot of appetite from sellers or buyers yet. That will only come when the market makes its big move, and to us that means going below the 200 WMA – the unthinkable to so many – shattering confidence and inducing panic selling. Only then will price head low enough and hard enough to hit a point so attractive that traders FOMO back in. It will happen, just not above $3k.

 

Take a look at another recent article we wrote to prepare our readers for this day in the markets: A Study of Capitulation. Our price points will change as the market situation evolves but right now we’re looking for an easy win at $2,500 and then more aggressive bids at $2,250 and below $1,900, both just above tentative support levels. We should also say that – if the daily or weekly candles close below the 200 WMA – then that line is likely to become resistance, and it could be a while before we head back over it. It just depends how fast capitulation occurs.

 

This is not financial advice. But maybe a year ago you wished you could have bought at these prices. Now you can. But you’re probably scared and will pass up the opportunity.

 

And that’s why so few amateur traders make money. It’s why the rich get richer. It’s why assets are concentrated in the hands of the few during a bear market, who sell to the many when the price is rising.

 

Make the most of this opportunity, people. Make a plan and act on it. Good luck.

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Tuesday Inferno market update

It’s set to be a big week, one way or another – and possibly both.

After a move to the downside on Friday, bitcoin has put in a new yearly low just above $3,200. Since then, the price bounced by 10% but failed to make further gains. Instead, it stalled around the $3,600 mark and is now heading back lower. Last week we noted that BTC was in a falling wedge pattern, and it’s now back inside this channel – having dropped out of it and then bounced back but proved unable to escape to the upside.

It is no surprise that $3,600 proved impossible to crack, or that the bounce from $3,200 occurred in the first place. $3,600 was the previous yearly low, and was then established as support; when the price dropped below that level, it became new resistance.

In terms of the sharp moves upwards we’ve seen, these are also to be expected. They are relatively significant price movements, but on low volume, and they fail when they hit resistance. These are absolutely characteristic of a strong bear trend. Shorts pile up and whales love to squeeze them; traders with stop losses set too low find themselves liquidated, the price shoots upwards, and then stalls. Even with such strong bearish sentiment, you will always get reaction rallies, temporary relief, and short squeezes. They are not supported by volume. When a move is decisive, convincing and permanent (or long term), it will be backed up by a massive volume candle: that’s what reversal looks like. These little rallies aren’t even close.

Until such time as that happens, do not be fooled. These short squeezes just set the market up for lower lows, and that’s what we’re expecting to occur in the few days – if not sooner. We’re trending downwards in that channel, and sooner or later it’s going to retest $3,200. If – and we believe when – that breaks, then we’re very likely to see yet another major move to the downside.

We’ve written a few times now about capitulation and where the price may bottom out in this market cycle, but this can only ever be guesswork. Do not believe anyone who says they know for sure. It could be higher or lower than the ‘experts’ state. Price may briefly fall dismayingly low, only to recover just as quickly and leave many traders badly burned. We also cannot know exactly when this will happen. It looks like a large downside move is being set up right now, though this is only based on probabilities: there could be a large move upwards, squeezing all those shorts and destroying a bunch of traders before we head back down. Markets are uncertain and bitcoin is very risky – especially now.

What we do know is that:

  1. The trend is bearish, and recent developments have been even more bearish.
  2. Bitcoin market cycles have historically ended with a bang, not a whimper – both at the top and at the bottom. That ‘capitulation’ move has high probability, just as the parabolic top was likely.
  3. Markets always keep traders guessing in the short term, and none more so than bitcoin.

With that in mind, we’re setting buys at $2,500 down to $2,000, with a skunk order a little lower just in case we can catch a flash-crash or a wick. When the next major move is completed, we’ll be able to evaluate the situation again and update our strategy – and figure out whether the bear market is over or has another stage to go.

TL;DR Do not be fooled by the short squeezes. Do not sleep, or at least try to sleep within four-hourly candles. Do not panic. Tomorrow’s bitcoin millionaires will be made from today’s market crash.

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