Bitcoin Trading : BTC to Trade Above $7,400 By Summer’s End

Bitcoin Trading : BTC to Trade Above $7,400 By Summer’s End
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Consensus among analysts in the crypto space is settling on the April rally signifying an end to the bear market for bitcoin, although a revisit of $4,700 is a possibility before the upward march resumes.

Also, the possibility of a sharper fall to the 12-month low at $3,150 cannot be ruled out either, but that would likely happen sooner rather than later, depending on the outcome of the current battle (11 April) at the $5,200 level.

However, we will argue in this analysis that a price range of $6,530 to $7,500, with a bias to the upper end of that band, is a balanced and realistic forecast for where the price will be in six months’ time.

Bitcoin (BTC) could have reached $7,500 by September/October 2019

With the change in trend to the upside yet to be consolidated as BTC struggles to trade above $5,300 but confirms support at $5,200, it is in some ways easier to judge the medium-term outlook.

So, let’s have a look at where exactly bitcoin might be trading in six months’ time.

With a combination of the interplay of technical analysis and an assessment of general crypto market fundamentals and industry progress, we can make a reasonable stab at where the price will be at the end of the summer.

What the BTC/USD charts are telling traders

Let’s begin by looking at what the charts are telling us, with the help of a bitcoin trading review via the Twitter posts of some influential traders.

The Ichimoku cloud, which provides an at a glance reading of market trends, on a 3-day view shows something highly significant has just happened signifying a trend reversal, as seen in technical analyst CJ’s chart posted on Twitter below:

Ichimoku cloud btcusd

Although the cloud is coloured red, indicating that we are still in a downtrend, the fact that the wick of the candle at the beginning of April pierced the cloud is a strong indicator of a change in trend to the upside.

A so-called edge-to-edge trade would see price targets at $6,550 and $7,400.

Also, the fact that the cloud on the 3-day above is narrowing also supports the case that a trend is in the process of reversing.

The chart below on the week view confirms the 3-day analysis.

There are two positions on the north side of the cloud drawn by the Ichimoku cloud’s two leading indicators (with area between shaded red), showing two similarly bullish price targets at $6,500 and $7,500, providing a probable trading range going out to mid-September.

BTC/USD week view

Significantly, the Relative Strength Index (RSI) reading in the 1-week chart introduced at the top of this feature, is well below an overbought level (70) at 58.1, although this is a radically different story if we were to pull out to the 1-day chart where the reading is a red hot 82.5 (and repeated lower down in this feature). But this may be a conservative view.

btcusd RSI

Rapid progress ahead – to $8,400, but might drop first

The case for the bitcoin price making more rapid progress is gaining some traction.

One version on this perspective comes from Crypto Thies, in which he uses Bollinger Bands, to posit a 2-week price target above $8,400, although before that happens he is fairly confident of a dip to $4,700.

bollinger bands btcusd april 2019

With bitcoin making heavy weather of breaking through $5,300 the price at the time of writing is still below Thies’s first major resistance at $5,500.

Dip before a parabolic price charge?

Adding weight to the prediction of bitcoin trading above $7,000 by September-October is the call by respected trader Peter Brandt who recently argued that the price is on the cusp of another parabolic period of price appreciation.

That has been latched on to by bulls although some of the less observant among them may have missed the retrace that comes before the lift-off.

In such a scenario the price revisits the bear market low at $3,150, which would very probably be the catalyst for the total capitulation that may be required to lay the foundation for sustainable forward movement.

Drawing parallels with 2013-15, the current mini rally is at a pivotal moment.

Peter Brandt BTCUSD technical analysis April 2019
Peter Brandt’s chart suggests another parabolic upswing could be imminent, but there may be a dip lower first

Will it complete the double-bottom pattern seen in 2013-15 (10a to 10b in Brandt’s in chart below)? If it does then that bearish spasm could be over and done with by June-July.

BTCUSD chart

The permabull outliers Brian Kelly and Tom Lee are worthy of a mention.

Brain Kelly is the chief executive at crypto investment firm BKCM. He sees a $6,000 near-term for bitcoin and a return to $20,000 on the basis of rising transaction volumes.

Tom Lee of Wall Street analysts FundStrat reckons fair value for bitcoin is $14,000, although he said BTC would finish at $25,000 for 2018, so make of his latest prediction that what you will.

Stuck in $4,000 to $6,000 range

For an analysis that falls somewhere between the conservative and more bullish assessments considered, there is the take from bitcoin billionaire Zhao Dong.

Zhao, writing on Chinese microblogging site Weibo, agrees that the final capitulation may not yet have materialised, although he sees the bottom for this late lifecycle of the bear market at $4,000, not $3,150.

He is expecting bitcoin to be rangebound between $4,000 and $6,000 for much of the rest of the year, and forming a higher low in October around the $5,000 level.

The countdown to bitcoin’s block reward halving in May 2019 could see the price reach $10,000 before it gives up those gains to trade between $6,000 and $7,000, argues Zhao, and only after then will the bull market resume.

So, guided by Zhao’s forecast, we would be limited to a maximum six-month price target of $6,000.

Although less bullish than others near-term, Zhao expects to see bitcoin trading above $50,000 by 2021 – even as high as $100,000.

Consensus opinion of analysts mentioned here place the bitcoin price somewhere between $6,000 and $7,400 – it is probably not unreasonable to expect the bitcoin price to challenge the upper end of that range by September.

If it does so, it will take the price back to levels last seen in September 2018.

Declining volume equals bullish exhaustion looming?

However, the declining volumes seen in the charts since April don’t provide near-term confidence.

Indeed, on the 1-day chart bitcoin is now only fractionally less overbought than it was at the top of the bull market in December 2017 – 94 to the current 82 RSI reading, as seen in the chart below.

btcusd RSI
BTC/USD 1-day chart – RSI showing overbought position last seen in December 2017

Bloomberg Intelligence analyst Mike McGlone, looking at similar data (the GTI  Global Strength Indicator) for its Bloomberg Galaxy Crypto Index, thinks a crash back to 12-month lows might be on the cards.

“Bulls appear to be grasping at straws or what best fits their more emotional less rational views, positions,” McGlone claimed.

Bullish golden-cross approaches

But an overbought position on the RSI or even the GTI is not necessarily enough by itself to predict market outcomes.

The 100 and 50-day simple moving averages have crossed briefly several times since the market’s all time high. However, the current such occurrence is the first time the 50MA (white line) has moved above the 100MA (purple line) so decisively (see chart below).

BTCUSD 1-day 2017 to 2019 100MA and 50 MA
BTC/USD 1-day chart 2017 to 2019, 100MA (purple line) and 50MA (white line)

It is not quite the golden cross of the 50MA rising above the 200MA, but it still indicative of bullish intent in the market.

Beyond the charts – market-moving news ahead

Over the next six months we can expect to see a number of market-moving events take place.

Although not all of them are directly related to the bitcoin network, they will have the effect of focusing the attention of consumers and investors on bitcoin’s potential.

First there is the Bakkt story.

Although the platform has seen its launch date slip from first quarter 2019 with no official date set, it is fair to expect it have launched within our six-month window to September. That will be a significant boost to bitcoin because the future’s product will be physically-settled.

Also keep an eye on trading in the CME bitcoin futures market which has hit record volumes this past month. Even though these instruments are cash-settled it is a conduit for institutional exposure to bitcoin.

Bakkt could also provide a boost to bitcoin’s original use case as digital cash with its tie-up with Starbucks.

And of course Fidelity Digital Assets platform is already out of the door catering for, at the moment, a select number of institutions and high net worth individuals.

In short then, FOMO is building among the institutions and the rich.

Telegram and Facebook will lift crypto, and therefore bitcoin

News flow will also be helped by Telegram and Facebook which will both have products released into the wild before September, if recent reports are to be believed.

Telegram is the messaging app beloved of the crypto community and lovers of privacy the world over.

Its 200 million active users may soon be enjoying the benefits of a distributed messaging service that includes crypto-infused payments, dapps, and remuneration of users for providing popular content.

This will be a launch that grabs headlines. The Telegram Open Network (TON) token will help to popularise crypto and that will be a boon for bitcoin.

The same goes for the Facebook’s stablecoin and its putative payments platform.

Latest reports claim that Facebook is looking to raise $1 billion from venture capitalists, which at first sight is odd given the mountains of cash Facebook generates internally.

The explanation lies in FB looking to put at arms-length its own crypto offspring in order to stay aligned with the decentralised ethos of the crypto community.

If the reports are accurate, then the value FB is creating will not feed back into the corporation but could be more widely disseminated.

An FB coin trading on crypto exchanges could light a fire under the market, although others fear it might suck the oxygen out, crushing all before it.

Bitcoin is not standing still

Bitcoin is continually undergoing tweaks from the core developers but there has been no major upgrade since SegWit.

However, that is changing as Schnorr signatures and Taproot move up the agenda.

Taproot, as it has been dubbed, will allow bitcoin to execute more complicated transactions, allowing the network to run smart contracts.

Schnorr signatures for their part will allow one signature to sign multiple transactions, greatly adding to the efficiency of the network.

These two upgrades are sadly not imminent, but the fact that Bitcoin Cash has successfully implemented Schnorr signatures is an indication of the possibilities of implementation coming into view sooner than thought, at least for Schnorr.

How will this affect the price over the next six months you may ask.

Well, as the upgrades move up the agenda it will focus the wider market – and bitcoin’s critics – on the fact that bitcoin is software and as such is upgradeable.

The supposed roadblocks to adoption, such as lack of scalability can and are being addressed, albeit at a slower pace than on other networks.

Also expect Lightning Network to continue to gain traction and if the price of bitcoin rises as we expect and transaction volume increases the fees and verification times will rise and fall respectively.

Although that’s a reminder of the scaling issue it also adds to the fear of missing out by heightening the impression of scarcity.

If China bans crypto mining it’s a plus for bitcoin

Some news just in that could also be bullish for the bitcoin price over the next six months is the prospect of China banning crypto mining in the country.

The overthrow of the dominant position of Chinese miners is actually good news for the bitcoin network.

Nagging fears about the centralising implications of domination of transaction verification by a small number of corporations would be put to rest if it led to new entrants in low-cost  energy locales being able to assert themselves.

The prevalence of cheap hydro and thermal energy in countries such as Austria, Canada and Iceland means they could attract many more crypto miners.

Additionally, less miners would mean less payout of block rewards, slowing the bitcoin inflation mechanism thus restricting supply – another bullish outcome.

And of course the Chinese manufacturers of ASIC mining rigs would still be able to export their product.

About Gary McFarlane

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