Last week we saw the Bitcoin price jumping 10% in less than a day and following that price movement people had been to question whether a bottom in Bitcoin had already formed. Given the current circumstances, an answer to that question is hard to give, but today we will try to examine Bitcoin from a fundamental, technical and sentiment perspective.
The fundamental condition
The lack of positive news had led to Bitcoin ended lower for the last six months in a row. Although we had a few positive hints like the VanEck SolidX ETF, or Fidelity’s interest to get involved in the crypto world, there had been no actual mind-blowing news which should have been influenced the demand.
Still, as we move deeper into 2019, the market players might become to price in several positive news. The overall view is that we will have a lot of cryptocurrency-related trading instruments, which could serve as a vehicle for further inflows.
The technical picture
Following a massive selloff, which took place between the beginning of November until mid-December, daily ranges had been to gradually decrease again. At the time of writing, the price action is locked inside a channel-type formation and we assume the direction of the breakout might set the mood for several weeks to follow.
Source: tradingview.com
We anticipate buyers will be ready to act if the price action will reach the 3,100-3,000 area. If a retest of the 2018 low will happen, a so-called secular bottom might occur, and decent upside potential might be unleashed.
There’s an interesting confluence of indicators around the 2018 lows since we have the weekly 200 simple moving average, a line where the Christmas rally had started in the second half of December.
The less -positive outcome will be if the sellers will manage to impulsively break below the 3,100-3,000 area. If that will happen, we suspect the bloodbath will continue until the 2,200-2,000 area.
Sentiment analysis
Directly correlated with the price action picture, the sentiment around Bitcoin is very negative. Although experts claimed various times that Bitcoin is an uncorrelated instrument, we can notice there are some links with the stock market. Each time risk sentiment is off, stocks and cryptocurrencies both tumble. We can conclude that on a longer-term, the performance of cryptocurrencies will be directly linked to the performance of other risk assets like stocks.
Summary
To sum up, we believe that given the current conditions, Bitcoin might be near to its bottom. Second of all, it will all depend on new innovations and when new flows of investments will enter the market. Also, we do not think it is the right time for a “buy-and-hold” approach since volatility spikes might continue to surprise the market.
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