Bitcoin, is $5k incoming?
Neckline and the Possibilities
The bear market dragged BTC into an abyss, as market cycles dictate, and capitulation has likely set in. The 35% rally from $3,100 over the course of 9 days is likely to experience continuation, as currently support has shown itself at the 61.8 Fib retracement.
A 61.8 retracement is the golden ratio for a sufficient pullback. Though what’s more promising is the current pending structure. Bitcoin is currently displaying characteristics of an inverse head and shoulders formation.
The latter, once complete, can be a catalyst to a strong reversal, but more importantly price must close above the neckline.
Technical Structure:
Due to volatility we will define our neckline as a parallel channel, between $4,153 and $4,253.
Once price closes above the neckline, $BTCUSD is very much likely to experience another 25% rally with the next bullish target of $5,246.
Historically, the last time we identified such a pattern, we called for a 14% upwards rally from the neckline, yet Bitcoin experienced a larger move for a 25% rally.
The June through July 2018 inverse head and shoulders formation lapsed a period of 37 days until completion. Our current inverse HnS is currently on day 38.
For the anticipated 25% rally to occur, price must first close above our previously highlighted neckline zone.
Fundamentals
Traditional Market, Inverse Correlation:
Most economists argue that BTC has no correlation with traditional markets, though over the last several months, as traditional market indices took dives, bitcoin quickly followed. Up until December 14th, 2018.
Bitcoin rallied for 35% as traditional market indices continued to tumble further into price discovery.
On October 24th, our team published on the incoming traditional market sell-off.
Since then, and by switching to 3x Bear ETF’s, some of our subscribers, along with team members, were able to capitalise on the sell-off by longing the proper inverse ETF’s. With phenomenal returns upwards of 50% and peaking at 69% on $SRTY.
The Relevance?
The S&P500, $SPY was the main index of interest, and has been very predictable in terms of price discovery and fluidity of movement.
The 1000 point rally last week was a mere bounce off the 1000day moving average, such a move following an elongated bull run, has had precedent on two occasions.
Prior to the 2008 financial crisis, and in 2001 before the stock market downturn of 2002.
Bitcoin’s show of force on December 14th, and her rise from the abyss after a steep declines across the board, was the break in direct correlation with traditional market sell-offs.
In times of financial crisis, economic downturns, and traditional market sell-offs, refuge has been found in alternative assets such as gold and silver. Bitcoin being labelled as “digital gold” by some, and after a spectacular run in 2017, could just be the next hedge, with 2017 being a glimpse of the store of value possibilities in cryptocurrency.
