Bitcoin Technical Analysis 12/30/15 – Vertically Challenged

Bitcoin’s price has made some improvements over the past few days after hitting a low of $405. In our last technical analysis we provided some evidence as to why the overall trend is still bullish, irregardless of the recent bull traps. Now that the new week started and New Years is approaching, Bitcoin is still feeling the momentum from the hype before Christmas.

An interesting observation about this weeks markets is the fact that 200k+ bitcoins were traded at the OKCoin exchange earlier today. OKCoin .cn has no trading fees, unlike the .com variant which has a 0.2% Taker Fee, for a list of bitcoin exchanges and comparison of fees check out this chart. Because of no trading fees, bots are able to trade with themselves causing spikes of volume. This tactic is known as wash trading, it is used to manipulate the market and to inflate an exchange’s volume, users on reddit named it “the volumizer”. Courtesy of onksk from r/BitcoinMarkets here is a picture of the volumizer in action

the-volumizer

In recent news, China suspended foreign banks from foreign exchange trading as the offshore yuan is seeming to crash. Using this chart from XE, we can see today’s CNY/USD crash

cny-crash-1230

Because most of the Bitcoin traders are in China, as the Yuan depreciates in value, many diversify their portfolio and invest in Bitcoins, as a result Bitcoin is feeling the bullish momentum of the investors. Hans from Tradingview suggests a Long position based on a technical indicator called a cup and handle. The cup and handle term is used to describe a stock which after rebounding and reaching old highs where many people bought, experiences selling pressure by the same investors. As a result, the stock tends to trade sideways for a few weeks. Here is a picture provided by Hans which shows the pattern:

cup-and-handle-1230

Bitcoin is having a hard time making a solid move down, i think we will find ourselves back on track to the moon soon.

On another note, check out this chart as provided by austeritysucks.com regarding OKCoin futures and the fact that the biweekly contracts are trading at a discount:

okcoin-futures-discount

This graph and table shows the difference between the market price of OKCoin’s three futures contracts: weekly, biweekly, and quarterlies.

Currently the weekly and biweekly contracts are trading at a discount to the index price which it settles on. This is indicative of a bearish sentiment in the market, because a discount offers a pure arbitrage to individuals who can buy the futures at a discount and then sell at spot immediately.

Bitcoin futures have a natural state of “Contango” (http://www.investopedia.com/articles/07/contango_backwardation.asp) where the premiums on the contracts tend to be higher in the longer horizons. Thus many market participants perceive a discount to be bearish for sentiment, indicating that price may fall further.

To see a historical view of how futures premiums are related to price action in the spot market see this chart from tradingview:

bitcoin-technical-analysis-1230

When comparing quarterly premiums to price, as the premium starts to trend in a certain direction, the market may steer price toward a similar bullish or bearish sentiment on the longer timeframes. quarterlies premiums are now trending in a downward direction, coupled with a potential adam and eve double top. We are sitting at a key level and have yet to really explore the 2050-2550 range on OKCOIN CNY.

According to a whaleclub teamspeak moderator swapman:

A downward movement may be easiest for the price and will allow bitcoin to test lower support levels which it skyrocketed through on the pump up to 510 on OKCOIN 3M quarterlies. While futures markets in bitcoin are still in their infancy, this indicator may become a useful measure of market sentiment. Keep an eye on it.

If you are a bitcoin trader looking to discuss trading strategies and meet traders alike checkout whaleclub’s teamspeak server at ts.whaleclub.io 

To conclude this article, the easiest way to describe the bitcoin markets these past few days is vertically challenged. The cup and handle pattern suggest difficulty in breakthrough for further gains. Additionally, swapman’s observation of discounted OKCoin futures suggest that the path isn’t clear just yet.

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Disclaimer: This is not trading advice.

 

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