Technical Update – 10-3-2018

XRP A Big Mover

The last couple weeks have not been very eventful. Take a look at a bitcoin chart and it’s not difficult to see. The notable exception is Ripple (XRP) which more than doubled in price. The most likely cause for this price spike is speculation surrounding xRapid, the Ripple Swell conference, and a few companies beginning to use Ripple.

Looking at the Ripple price chart over the last month (below), we see that the price began to spike around September 20 and has been hovering in the $0.50 to $0.60 range since then. Other than Ripple, most coins have been very stable over the last two weeks as volatility continues to decrease.

Ripple Is Increasing In Price

Bitcoin Might Be Moving Soon?

Now, let’s take a look at the most important bitcoin chart that everyone is looking at today. My chart is from Cryptowat.ch.

Most Important BTC Chart

What we see is a large triangle where the upper resistance line begins about six months ago near $12,000. The bottom support line of the triangle on this bitcoin chart starts at the last bottom slightly below $6,000 and extends to somewhere in the $6,300 to $6,400 range today. This is the line that is being looked at most commonly and is what is drawn in my chart.

However, we could also draw the support at $6,000 and the charts would still make sense. The point is that the support and resistance lines are becoming very close and the market will need to decide which way to go once the triangle is broken.

Most analysts seem to believe the market will move sharply as soon as the triangle breaks. Either we break up sharply to $8,000 or we break down closer to $5,000, One or the other is imminent.

No So Fast

However, I am going to disagree with this. My prediction is that we “break” the triangle going sideways. Assuming the market eventually breaks up, there are a lot of people on the sidelines who want to profit off of this breakout. They want to wait until it is clear we are not going lower, because, like everyone else, they are worried about the prospect of a sharp decline towards $5,000.

To give them enough confidence to jump in during a flat market, we need to stay flat for a little while after the triangle breaks. During the flat period, short sellers will slowly lose hope of an imminent crash and slowly start to cover while the longs slowly build a position. The risk to reward ratio towards the upside will slowly get better and better. In the perfect scenario, we will have a rally very similar to the one in October/November of 2015.

Other Scenarios

Of course, we could very well break down and have to repeat all this consolidation over again at a lower price level.

For comparison, here is the chart of the last bitcoin bubble/adoption wave from bitcoincharts.com.

Bitcoin Chart Bubble

It seems like the current bitcoin chart resembles the period near May of 2015. The difference, however, is that the sentiment was worse in 2015. People bearish on bitcoin at that point argued that the entire 2013 bull market was fueled by Mark Karpelas printing money out of thin air to manipulate the prices up on Mt. Gox. They argued that bitcoin could not possibly recover from such a blatant scam/hack where everyone using Mt. Gox lost money.

Analogously, today we have fears over Bitfinex doing the same with Tether. However, the situation is not as dire because no exchange today has as big of a market share as Mt. Gox did in 2013, and none of the main exchanges lost all of their customer funds at the top of the price increase in 2017. Just some stuff to think about as we head into the next couple weeks which will probably be marked with rapid sentiment shifts back and forth at every small price movement. It may be frustrating, but there will be quite a bit of profit for those who are on the right side of the trade!

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