BTC from optimism to despair

This time last week, Bitcoin was making headlines, trading just below $14k. Up over 75% from its June low near $7.5k and more than 200% above where it started the year. “Flight to safety” type buying ahead of last weekend’s G20 meeting, increasingly aggressive rhetoric between Iran and the U.S., as well as optimism that Bitcoin was moving closer to mainstream acceptance the main reasons sighted behind surging prices.

Seemingly validating the legitimacy of the rally, two exchanges which offer investors a platform to trade Bitcoin confirmed record investor interest. The Chicago Mercantile exchanged noted on the day that Bitcoin traded to near $14k, Bitcoin futures traded a record $1.7B in notional value surpassing the previous record by more than 30%. Three days later, the founder of BitMEX Arthur Hayes noted in a tweet, that annual trading volume on his exchange had surpassed U.S. $1 trillion.

As those familiar with bitcoin’s volatility know after a wave of surging prices and optimism, a setback is never far away. The trade war truce that the G20 Summit delivered along with an outage on popular cryptocurrency trading platform Coinbase has resulted in the price of Bitcoin dropping to a low near $9.6k overnight, over 30% below last week’s high-water mark.

The rapid rise and subsequent fall in Bitcoins price will do little to ease the concerns of those who point out that Bitcoins excessive volatility means it will never provide a reliable and stable store of value. However, for trading folks, Bitcoins volatility is one of its chief attractions. With that in mind, let's turn to the charts.

Last week in this article https://www.cityindex.com.au/market-analysis/what-to-do-about-bitcoin/ we highlighted some initial signs of rejection as Bitcoin faded from ahead of key resistance near $14k and that that the appropriate place to buy Bitcoin longs, was back towards support near $10/9k.

After reaching this level overnight, a potential daily bullish reversal candle is forming. At the very least this warns that prices are looking for a base and that Bitcoin may see a short-term rally back towards 12k. However, while the price target for the pullback has now been reached, the speed of the decline has been too rapid to fit the ideal criteria of a completed corrective Wave IV pullback (Elliott Wave). Hence, while a short-term bounce is possible, my preference is for Bitcoin to follow the road map as outlined on the chart below.

Source Tradingview. The figures stated are as of the 3rd of July 2019. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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