Another day another all time high. Bitcoin’s price is going up with no end in sight as the dollar’s value is dropping like hot cakes. Why is the price going up? How long will this price trend last? When can we expect a correction? These are all the questions this article will attempt to answer.
Why is the price going up?
This is the most common questions asked by new investors and traders who are hearing about Bitcoin’s meteoric price rise. The answer isn’t that simple, as there are an array of factors in play. First and foremost, Japan’s adoption is one of the main reasons for the price rise. For example, Bitcoin is currently trading at 299481.5 Yen on Coincheck – Japan’s top Bitcoin exchange. This translates to a price of $2686 for a single coin. Compare that to Bitstamp’s current $2451 trading price and we can see that Japan is trading at a roughly 9% premium.
Not only is this a signal of strong interest in the country, but it also creates massive arbitrage opportunities if you have bank accounts in both Japan and the US. In addition to Japan’s interest, the US dollar has traded at 6 month lows today. According to cnbc:
“Worries over U.S. President Donald Trump’s recent firing of FBI Director James Comey, who was overseeing a probe into possible links between the president’s team and Russia, and concerns about possible delays in Trump’s efforts to implement his economic stimulus plans have recently pressured the dollar.”
There are also some other minor factors which contributed to the Bitcoin hype, one of which includes the recent WannaCry Ransomware which received extensive coverage in the media. While most traders thought that the association of Bitcoin with the ransomware would be detrimental to the price, they were wrong as the fact that the ransomware exclusively accepted the cryptocurrency for payment only showed that Bitcoin is truly liberating. While it isn’t great for Bitcoin’s reputation that criminals are accepting it, it also wasn’t great for internet’s reputation when news spread that mostly pedophiles were using it. As William Gibson once said:
“Technologies are morally neutral until we apply them. It’s only when we use them for good or for evil that they become good or evil.”
How long will this trend last?
The answer to this question is different depending on whom you ask. Users on Tradingview are using anything from Moon Cycles to Fib Retracements to Fractal Patterns to predict the coin’s price. Yes, you’ve heard right, Moon Cycles. JustinCaravaggio from Tradingview posted this chart showing how during bullish runs, full moon means volatility:
Chart: Tradingview
It looks like during bullish runs (green lines) , the full moon (dark) marks volatility leading up to the new moon (white). For the first half of the new moon (white phase) we see a cool down or support build. This trend appears to be reversed during bearish phases. Next new moon is in 2 days. So based on these trends, on May 25th or within a few days of the 25 we could see the bitcoin top or a small consolidation before the next leg up.
The reality of the situation is that nobody has predicted Bitcoin’s current price rise before it happened. Because the price is behaving so unexpectedly, using any form of technical analysis may be futile at this point. It seems that with new all time highs being broken every single day, technical analysis based on Moon Cycles is just as reliable as analysis on more respectable metrics such as Fib Retracementss or Elliot Waves.
To answer our question of how long will this price trend continue, my answer is as long as the price rally has fuel. When I say fuel I am referring to trading volume. If you look at the chart below, you will notice that during times of relatively low trade volume the price is stagnant, but when the volume comes in the price starts moving.
So far, the charts speak for themselves as we can see a major influx in trading volume during the past few weeks. If the trading volume starts slowing down on the market, the first sign of that will be a decrease in premiums on Japanese exchanges. As mentioned earlier in this article, Japan is trading Bitcoin at roughly a 9% premium, if that level starts dropping it could be a sign that Japan’s buy orders are slowing down, which means traders should expect a correction or at least a diminished bull market.
When can we expect a correction?
While everybody wants to know the answer to this question, the answer is even harder than the previous question. Even though high trading volume means that the price rally has fuel, it also means that the momentum can pull the market in either direction. As we are approaching a mental resistance level of $2500, traders will be looking to close their position and cash out their profits.
This puts the next level that traders should be aware of in the $2500-$2600 range. So far, the levels that the market corrected on includes $1500s, $1700s, $2000s, and $2100s. This goes to show that emotions are high during this rally, and these mental price levels serve as significant support and resistance lines.
As a result, my prediction is that a possible correction may ensue either in the $2500, $2600, or the $3000 level if Bitcoin is lucky enough to rise that high.
Dislaimer: This is not trading advice, this article is for educational purposes only. If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.
