Despite positive announcements this fall/winter from PayPal, Microsoft and Time Inc, it appears that bitcoin is still not in a position to end the 2014 bear market.
Rather, evidence suggests that insufficient investment is coming into bitcoin to compensate for the 3,600 bitcoins that are mined each day. This requires a daily net inflow of $1.1 million into bitcoin simply to maintain the current price. This would explain the long, slow decline in bitcoin’s price — miners continue to sell in order to cover their electricity bills.
Bitcoin traders should now be asking themselves: just how low will the price go?
Let’s take a look at the evidence traders should consider before entering a position.
Background info
While most traders are concerned with short-term trends, taking a long-term view still provides good background information.
Over at /r/bitcoinmarkets, Greenmarkcheck shows that there is still plenty to come out of the price before long-term support is found. Moreover, at this point, one can assume that the accelerated long-term trend, previously observed in 2013, was completely broken this summer.
The main takeaway from the above chart is that it is entirely feasible for bitcoin to form a triple bottom at the $320-$310 range, a double bottom at $275, or a new recent low beyond $275.
Evidence for a triple bottom
The main indication of a triple bottom is the support around $320. Hen0xyd shared his chart demonstrating this on Bitcoin Talk:
If this support holds, a triple bottom is likely to be recorded. However, traders should question how strong the support actually is. In the past, the lower part of candlesticks have broken this support relatively easily.
Hence, if a trader believes that support trends should be drawn in line with candlestick lows, rather than closes, a price decline beyond $320-$310 is likely. This would make a triple bottom doubtful.
Evidence for a double bottom
If support fails in the low three hundreds, the next level of strong support will be at $275 — the lowest price recorded after the winter rally of 2013/2014.
A great chart by User100000, explains this scenario is highly probable:
The price appears to be following a series of Elliott Waves that will conclude with a price at $272. The completion of an Elliott Wave sequence at strong support signals a trend reversal in the low $270 range. Viewing the chart on Trading View is recommend to see the full sequence.
Also, those with a short-term trade horizon, may want to follow this wave sequence to identify opportunities to go long as the price bounces on the way down to $275.
Evidence for a single bottom
A single bottom will be a scenario where the price falls beyond $270. While further double or triple bottoms may later be formed at this new lower low, for now a new low would appear to be a single bottom.
Back at Bitcoin Talk, Tzupy compares the current sell-off to the price decline seen in the summer:
The thinking behind this chart is that, as the markets traditionally move slower in the summer, a price decline of the same magnitude will happen faster this winter.
Tzupy explains: “if the speed stays twice as fast as June — August — 6th October, then THE bottom could be reached in January”.
This also corroborates with the first chart in this post.
Additionally, if one assumes the price will fall by the same percentage as the summer sell-off, the price works out to bottom at around $222. This $275 — $200 price range has again been identified as a possibility by Jameve at Trading View:
While Jameve recognizes the support at $275, he believes that price manipulators want the $259 high recorded in the spring 2013 rally to be broken. Jameve states: “think about it, if you were a market mover, how would you get people to panic? By breaking psychological price levels.”
Conclusion
The theme of this post has been clearly bearish. Unfortunately, there is little evidence of an end to the bear market anytime soon. Traders should be be trying to figure out where the bottom may be at this stage. To hedge themselves from a decline price, traders might want to consider shorting at BTC.sx with leverage.
