Bitcoin has been moving up for some time now. The path to higher values
has been a rocky one and Bitcoin bulls might be getting some encouragement.
Whether this translates to a bullish outlook is another question entirely.
Not all governments are hostile to Bitcoin. Actually, a lot of governments
are simply not sure what Bitcoin is and how to approach it. The government of
Malta stands out as an example of how officials might actually try to
understand the currency and regulate it. In an article on CoinDesk, we read:
Now, in an address to the United Nation's General Assembly, Malta Prime
Minister Joseph Muscat has said he sees blockchain technology as the tool
which will allow bitcoin and crypto to "inevitably" gain
widespread, mass adoption and become the future of money.
Muscat has previously said he believes bitcoin and blockchain have the
ability to eliminate third party service providers, giving users more freedom
over information and money.
(...)
"By being the first jurisdiction worldwide to regulate this new
technology that previously existed in a legal vacuum. Blockchain makes
cryptocurrencies inevitable future of money. More transparent, it helps
filter good business from bad business.”
This is a pretty interesting development. We are actually seeing one
country talking about regulating Bitcoin and including it in the financial
system. Is this a breakthrough? For starters, it is hard to overlook the fact
that Malta is a rather small country. This means that whatever its government
does, doesn’t necessarily have to have any impact on the developments in the
broad Bitcoin market. But we can’t brush this event off either.
The willingness of one government to regulate Bitcoin provides us with a
hint that it might not be completely unreasonable to expect governments to
regulate Bitcoin in the years to come. So, Malta gives us something to look
forward to. That is, we are on the lookout for systemically important
countries changing their approach to Bitcoin. For instance, any similar
comments from the U.S. government could be interpreted as bullish. We are not
at this point yet, though.
Bitcoin Moving Higher?
On BitStamp, Bitcoin has been, on average, trading higher in the last
three weeks. This might be encouraging for Bitcoin bulls. But is it a
game-changer?
In our opinion, it is not. Even though the currency has been generally
trending higher, there are still other factors to consider. One of them is
the fact that the most prominent moves to the upside took Bitcoin above the
50% Fibonacci
retracement level but were stopped by the 38.2% level. Second, the
currency is now back below the 50% level and this suggests that the recent
move up might have broken down. Third, the recent two local tops – the last
two ones formed in the last month – follow a pattern
of a lower top, which suggests that the move up might have dried up.
The mentioned factors point to possible lower values for Bitcoin.
The action of the last three weeks looks like a correction within a more
pronounced move down. The immediate level to which Bitcoin could drop is
slightly above $6,000. It could turn out to be the trigger for more action to
the downside.
$6,000-6,500 Area
On the long-term
Bitfinex chart, we are seeing a move to the upside but it is pretty clear
that this move pales in comparison with other moves from the not-so-distant
future.
The long-term chart also provides us with an indication that Bitcoin seems
to be dancing around the 78.6% Fibonacci retracement level based on the rally
from around $3,000 to the all-time high around $20,000. This line seems to
have coincided with the February bottom, the April one, and the currency has
been moving around it since mid-June. If we see a sustained move below this
line, then it might provide a trigger for the move down.
But there’s another level quite close, which could also turn out to be the
beginning of more significant declines. Namely, $6,000 is the support
level suggested by a different set of Fibonacci retracements (the ones
based on the February rally) and by recent lows. It would seem that together,
these two levels suggest that the $6,000-6,500 area is a place where
powerful declines could start. And we’re right at the upper boarder
of this area (at the moment of writing).
It is entirely possible that we could see a move up from the current
levels, but the signals that we see in the market suggest a bearish outlook.
Any move to the upside from here might be volatile
and quickly reversed to the downside.
Summing up, in our opinion both short-term and long-term
signals suggest a bearish outlook.
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Thank you.
Regards,
Mike McAra
Bitcoin Trading Strategist
Bitcoin
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