Resistance at $6,600 has again proved too much for the bulls, with bitcoin slipping 0.75% in the past 24 hours to $6,569, according to coinmarketcap. The gods of the bears want the bulls to suffer for their audacity in taking the price to nearly $20,000 last year.
It takes time to both squeeze out the froth of December 2017 and also to regain buyer confidence and attract fresh blood. Expect to see another run at $6,700 (dashed red line on 4-hour chart below)which was last seen on 8 October, as the fight at the 4-hour 50-day simple moving. average (green line below) goes on.
Despite impressive news flow for the sector – from the Yale endowment to advances for adoption in places like Venezuela, as well as blockchain traction as witnessed by, for example, the UK telecoms regulator looking onto distributed ledger technology to put landline numbers on blockchain.
Those who watch the markets from day to day will have grown weary of hearing about descending triangles and wedges and imminent breakouts. The markets are a game of pull and push and at the moment bulls and bears continue to cancel each other out.
Beyond the charts, the bottom line is we need more buyers. They will come. Be patient. Trouble is though, some can’t afford to wait.
Here’s the four-hour chart at 13:38 UTC+1:
BTC price analysis: When will the buyers come?
With volatility at 15 month lows, a turn in market sentiment probably won’t materialise until there is much higher volumes and a steady rise in price.
It may sound paradoxical but for the market to again attract retail investors in numbers, the price needs to rise and the narrative change from “is bitcoin still crashing?” to “why is bitcoin rising?”.
But how can the price rise if the buyers aren’t coming because the price isn’t rising? You can see where that circular log-jam is going. Nowhere?
However, the missing link that gets us out of that catch-22 is the institutional buyers and high-net worth individuals turning up in greater number, and the falling stock market (and rising bond yields) we mentioned a couple of weeks ago.
The rich are taking some of their money off the equities table. Some of them are putting a small portion into crypto. The significance of the change in leadership in mainstream markets and its likely impact on crypto has not been priced in by market participants, we believe.
And when retail catches up with the fact that stocks are falling and bitcoin isn’t (or is even rising), then the energy that brings $8,000 or even $10,000 bitcoin into view reappears.
For now the battle of the triangle continues but it is worth restating that a descending wedge of this duration typically signals a big move either way. That move, we reckon, is more likely to be up than down. If it is a move lower that is threatened, there is solid resistance all the way back to $6,000, if such a retracement comes into play.
Miner revenue up, profits down
A report from Diar on the crypto mining industry finds pressured profitability despite rising revenues. From August the mining reward revenues has fallen below electricity costs. The effect is to further centralise mining, given that 70% are already in China. Are they based in China for the pollution? Nope, it’s for the cheap energy, which is way below the market price in the west:
“China, who has an average cost of $0.08 kw/h at retail, and estimated to be half that at wholesale, is currently one of the handful of countries that would make economic sense to mine for Bitcoins with retail prices. Even then, however, equipment, salaries, rents, overheads could push inexperienced mining operations into the red.”
Here’s the relevant charts:
Bitmain, the largest miner, is holding an IPO in Hong Kong and there are doubts about its profitability levels given the way it hid its revenues for Q2 inside the H1 figures.
And it is not just the miners who are feeling the pinch. Exchanges are hurting too.
That was brought home in the news from the UK that Coinfloor, the first major exchange in the UK, as sacking 40 staff as it “adjusts to market conditions”.
Expect to see heightened levels of industry rationalisation and consolidation as the bear market persists.
Juniper profits of doom
Research from Juniper finds otherwise, and concludes that bitcoin and crypto in general is headed for implosion. The research sees the fall from 360,000 a day in late 2017 to just 230,000 in September 2018 in daily transaction volumes as a critical metric (it is)with the value of those transactions dropping from $3.7 billion to less than $670 million in the same period. If you have £1,250 burning a hole in your pocket, you can get yourself a copy of Juniper’s report (yeah, right).
“In short, given our concerns around both the innate valuation of Bitcoin, and of the operating practices of many exchanges, we feel that the industry is on the brink of an implosion,” Juniper said.
Gary has been writing about cryptocurrencies since 2013 and currently works as the cryptocurrency analyst at interactive investor, the UK’s second-largest online investment platform. Gary contributes for Coin Intelligence News in a personal capacity and none of his commentary should be considered investment advice. Gary is the winner of the ADVFN International Financial Awards 2018 Cryptocurrency Writer of the Year. Contact Gary on twitter at: @gary_mcfarlane