Bitcoin Declined by 30% Five Times in 2017, Recent Correction is Tolerable

As CNBC Africa’s CryptoTrader host and producer Ran Neuner noted, bitcoin declined by 30 percent on five different occasions in 2017. This month’s 20 percent correction in bitcoin is tolerable, given the major corrections it had experienced in the past 12 months.

Major Correction

Other major cryptocurrencies such as Ethereum and Bitcoin Cash also recorded corrections in the 50 percent range last year, with the price of Ether, the native cryptocurrency of Ethereum, dropping from $360 to $130. Since then, Ether has surpassed $1,000, and surpassed $2,000 in the South Korean cryptocurrency exchange market.

Ethereum co-founders Vitalik Buterin and Charles Hoskinson expected a major correction to occur in the cryptocurrency market, because the market has grown at such a rapid rate within a short period of time. Blockchain projects with no products and users, solely with whitepapers with technobabble reached multi-billion dollar market caps.

Major corrections prevent short-term bubbles within the cryptocurrency market from occuring by shaking off weak hands and speculators. After major corrections, the market tends to solidify and strengthen, and initiate stronger rallies, as shown in the chart provided by prominent finance analyst Max Keiser below.

With initial coin offerings (ICOs) without products, users, and legitimate business models dominating the cryptocurrency sector, a major correction was long overdue. When the cryptocurrency market surpassed $500 billion in valuation for the first in history, Buterin questioned the justification of that valuation, and whether blockchains have done enough to support the billions of dollars invested in the market.

Hence, while the recent correction led to a $200 billion drop in the market cap of cryptocurrencies, it was necessary to ensure that the market remains stable and strong. Already, in the past 24 hours, the market valuation of cryptocurrencies increased from $450 billion to $520 billion, by over $70 billion.

Where Does the Market Go Next?

The bitcoin market in particular is expected to have a strong year in 2018, given the entrance of institutional investors and retail traders. Several markets including India are also expected to regulate their bitcoin markets, introducing many millions of new users to the digital currency.

Constantin Papadimitriou, president of Pundi X, told QZ in an interview that approximately 10 percent of all bitcoin transactions take place in India. According to Pundi X, which focuses on offline cryptocurrency sales, surveyed 3,000 respondents across India, Indonesia, Japan, Russia, the UK, and the US, the demand for bitcoin India is stronger than ever, despite the government’s strong warnings against the cryptocurrency.

While it is unlikely the government of India will legalize and regulate its cryptocurrency market in the short-term, given that a task force has already been established, there is a higher probability than before that the government will regulate its bitcoin market.

With China, the world’s largest remittance market, having banned bitcoin, the next big market in terms of remittance and e-payments is India. The penetration of bitcoin into the Indian market would lead to a surge in the user activity of the digital currency.

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Bitcoin Price Key Highlights

  • Bitcoin price staged a massive selloff after breaking below the descending triangle bottom previously highlighted.
  • Price has dropped by around $3,000 and could have a few more losses to go before bottoming out.
  • Bitcoin is currently finding support at a Fib retracement level but might be due for a larger pullback.

Bitcoin price sold off sharply earlier this week and may have a few more losses lined up before bulls return.

Technical Indicators Signals

The 100 SMA is above the longer-term 200 SMA on the daily time frame to show that the path of least resistance is to the upside. The gap between the moving averages is widening to reflect stronger bullish momentum and the 100 SMA is currently holding as dynamic support.

Stochastic also looks ready to turn higher but has a bit of room to go before hitting oversold levels. This suggests that bitcoin price could still dip to the ascending trend line support on the daily chart. This is located closer to the $9,000 level.

RSI also has some room to drop so bitcoin price could follow suit. A return in bullish momentum could lead to a move up to the nearby area of interest at $12,000-13,000 while a break below the trend line could still find support at the 200 SMA.

Market Factors

Persistent concerns on the ongoing crackdown in bitcoin trading and mining in South Korea and China are weighing heavily on bitcoin price and other cryptocurrencies. When the tech level broke, more sellers joined in and exacerbated the drop.

Meanwhile, the dollar is also on weak footing as the euphoria over the tax plan has faded and the attention is turning to a possible government shutdown. Equities also closed in the red as the oil price decline weighed heavily on the energy sector.

More updates on the bitcoin crackdown in South Korea could influence price from here, although another dip could encourage bulls to buy at cheaper levels.

Bitcoin Price Key Highlights

  • Bitcoin price is back to testing the support of its descending triangle pattern, which also happens to be the neckline of a complex head and shoulders formation.
  • A break below this $13,000 area could lead to a drop of around $6,000 or the same height as the chart formations.
  • A bounce, on the other hand, could keep the consolidation going.

Bitcoin price is making another attempt to break below the support at $13,000 and doing so would mark the start of a longer-term drop.

Technical Indicators Signals

The 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This means that the selloff is more likely to resume than to reverse. The 100 SMA also appears to be holding as dynamic resistance as well.

Stochastic is pointing down to show that sellers are regaining the upper hand. RSI is on the move south, so bitcoin price could follow suit. The next visible area of interest on the 4-hour time frame is around the $9,000 level.

Market Factors

More headlines on South Korea’s plans to stop bitcoin trading in the country are leading investors to liquidate their long positions in anticipation of lower volumes and activity down the line.

Some statements indicated that the government simply wants to remove anonymity in transactions, leading some to believe that bitcoin trading could carry on. A statement from Shinhan Bank, however, signaled that it does not intend to introduce an identity verification service for deposits and withdrawals from virtual bank accounts:

“We’ve developed a system to introduce identifying virtual account customers in accordance with the government’s efforts to curb the cryptocurrency craze. However, we decided to scrap the service enabling the trade of digital tokens which has become a serious social issue.”

So far, several politicians and citizens have signed petitions to demand that the government step back from adopting the measure.

 

Bitcoin Price Key Highlights

  • Bitcoin price continues to tread sideways and is still hovering around the bottom of its descending triangle on the 4-hour chart.
  • Price looks ready for a bounce off support as a double bottom is forming.
  • Bitcoin has yet to break past the small reversal pattern’s neckline around $14,000 before confirming the climb.

Bitcoin price can’t quite seem to gain bullish momentum to climb up to the triangle resistance, but buyers are still defending support.

Technical Indicators Signals

The 100 SMA is below the longer-term 200 SMA to show that the path of least resistance is to the downside. In other words, the bottom of the triangle is more likely to break than to hold.

Stochastic is turning higher, though, so bulls could still regain control of bitcoin price and push it back up for a test of the triangle resistance at $15,000. This is also close to the 200 SMA dynamic inflection point, which might hold as resistance.

RSI is also on the move up to indicate that buyers have the upper hand. However, if both oscillators hit overbought levels and turn back down soon, sellers could make another attempt at pushing bitcoin price below the triangle support at $13,000. Note that the triangle is around $6,000 tall so the resulting drop could be of the same height.

Market Factors

Dollar demand has once again picked up late last week when US CPI and retail sales came in mostly in stronger than expected. Headline CPI came in line with estimates of a 0.1% uptick while the core reading beat expectations with a 0.3% gain versus the estimated 0.2% increase.

As for bitcoin price itself, this particular cryptocurrency seems to be losing ground to its altcoin rivals on the lack of volatility. Alternative digital currencies are offering higher potential returns and are much cheaper, after all.

Besides, the crackdown in China and South Korea is once again threatening volumes and global activity in bitcoin.

Key Points

  • Bitcoin price traded lower this past week and tested the $12,600 support against the US Dollar.
  • There was a break above a major bearish trend line with resistance at $13,800 on the 4-hours chart of BTC/USD (data feed from SimpleFX).
  • The price has to break the $14,500 level and the 100 simple moving average to gain upside momentum.

Bitcoin price is stable above the $12,600 against the US Dollar. BTC/USD could soon gain momentum above $14,500 to move past $15,000 in the near term.

Bitcoin Price Upside Move

This past week was slightly bearish for bitcoin price as it moved below the $14,000 level against the US Dollar. The price traded lower and moved towards the $12,200 level. A low was formed at $12,670 from where the price started an upside move. It traded above the $13,000 level and the 23.6% Fib retracement level of the last decline from the $17,112 high to $12,670 low.

During the upside, there was a break above a major bearish trend line with resistance at $13,800 on the 4-hours chart of BTC/USD. The pair managed to move above the $13,900 level. However, the upside move was protected by the $14,000 level and the 100 simple moving average. Moreover, the 38.2% Fib retracement level of the last decline from the $17,112 high to $12,670 low also acted as a resistance. It seems like the price has to move above the $14,500 level and the 100 SMA to gain upside momentum.

Bitcoin Price Weekly Analysis BTC USD

Once there is a break above the $14,500 level, there are chances of it breaking the $15,000 level in the near term. The overall bias is stable above the $12,500 level with an initial support on the downside at $13,200.

Looking at the technical indicators:              

4-hours MACD – The MACD is showing a few positive signs of a trend change.

4-hours RSI (Relative Strength Index) – The RSI is struggling to move above the 50 level.

Major Support Level – $12,500

Major Resistance Level – $14,500

 

Charts courtesy – SimpleFX

Kentucky Fried Chicken (KFC), the beloved US-based fried chicken chain, has started to accept bitcoin from its customers.

KFC’s Bitcoin Campaign

For a limited period of time, KFC is selling a bucket of fried chicken for $20 presented in a bitcoin-themed container demonstrating the price of the fried chicken bucket at the time of the sale. For instance, at the time of reporting, $20 is equivalent to $0.0011204, and upon the request of a delivery, KFC embeds the amount of bitcoin equivalent to the price of the bucket of fried chicken onto the container.

While KFC Canada does not intend to integrate bitcoin as a permanent and long-term payment method as of current, the company has introduced its bitcoin campaign to address the rapidly increasing demand for bitcoin and the cryptocurrency market in general.

The strategy of KFC Canada to implement a unique campaign involving one of the fastest evolving technologies and forms of money in bitcoin has been massively successful, as the company obtained significant mainstream exposure from the media and social media platforms such as Facebook and Twitter.

Throughout the limited offering of bitcoin-themed fried chicken buckets, KFC consumers can utilize BitPay’s payment processing service to purchase the signature KFC fried chicken with bitcoin.

In total, the bitcoin-themed bucket of fried chicken costs just over $27, including the $20 price of the bucket itself, taxes, and shipping fee. Inclusive of bitcoin transaction fees, which are averaging at around $5 on major blockchain wallet platforms like Blockchain and Trezor, the KFC bitcoin-themed fried chicken bucket costs over $30.

Given the current state of the Bitcoin network and its underlying scalability issues, it will be difficult for any large-scale commercial fast food chain to accept bitcoin as a payment method. But, in the future, the integration of second-layer solutions could allow restaurants to enable bitcoin payments, if transaction fees can drop below $1.

Second-layer and off-chain scaling solutions including Lightning and Ethereum’s Plasma are capable of processing near-instant payments with significantly low fees. As such, in the long-term, fast food conglomerates like KFC accepting cryptocurrencies as major payment methods is a possibility.

McDonald’s and OmiseGo

In late 2017, McDonald’s Thailand partnered with OmiseGo, the Ethereum blockchain-based payment processing platform, to process payments of McDonald’s online orders using the immutable blockchain network of Ethereum.

Already, McDonald’s Thailand is processing large volumes of credit card payments on the OmiseGo blockchain network. The integration of McDonald’s Thailand of OmiseGo enables the company to seamlessly integrate cryptocurrency payment methods, if the company decides to address the growing adoption of bitcoin, Ethereum, and other digital currencies.

“The consumer’s experience begins right when they place the order online, and payments is a critical component of that experience. Offering highly secure, seamless payment options across all platforms and devices is key to delivering a seamless experience for McDonald’s customers.” said Jun Hasegawa, CEO & Founder of Omise.

The adoption and integration of blockchain technology by fast food chains like KFC and McDonald’s will drastically increase the awareness of millennials in bitcoin and cryptocurrencies, which have evolved into a major asset class.

Bitcoin Price Key Highlights

  • Bitcoin price has formed lower highs and found support at $13,000, creating a descending triangle pattern.
  • Price is currently testing the bottom of the formation and might be due for  bounce back to support.
  • Technical indicators appear to be signaling that the consolidation could carry on.

Bitcoin price is trading inside a descending triangle pattern and is currently testing support.

Technical Indicators Signals

The 100 SMA is below the longer-term 200 SMA on this time frame, so the path of least resistance is to the downside. This suggests that the triangle support is more likely to break than to hold, possibly sending bitcoin price down by $6,000 or the same height as the triangle formation.

These moving averages are also close to the triangle resistance, adding an extra ceiling in the event of a move higher. Stochastic is pointing down to show that sellers have the upper hand but RSI looks ready to turn higher and indicate a return in bullish momentum.

Market Factors

The US dollar was actually on weak footing as PPI numbers turned out weaker than expected and traders set their expectations lower for today’s CPI release. Note that downbeat inflation expectations are likely to weigh on Fed tightening odds.

Meanwhile, bitcoin price continues to reel from the lack of market interest as investors appear to be flocking to altcoins instead. South Korea also announced plans to ban bitcoin trading in the country, likely putting a huge dent on overall market activity.

In China, the government also ordered several mining facilities to close, causing costs to mine to surge.

“Some of our long-term hosting partners are facing a crisis of farm closure as mining resources in mainland China become more scarce, leading to rocketing costs of our cloud mining operation,” a statement from ViaBTC Technology Ltd., which runs the fourth-biggest bitcoin mining collective, said. “To guarantee the long run of cloud mining, ViaBTC has no choice but have to readjust our maintenance fees.”

Bitcoin Price Key Highlights

  • Bitcoin price is still within its ascending channel on the 1-hour time frame and has bounced off support.
  • A bit more bullish momentum can be seen as price broke past a small descending trend line.
  • Technical indicators, however, are signaling that bearish pressure could kick in soon.

Bitcoin price looks ready to resume its climb to the channel resistance but there are indications of bearish pressure.

Technical Indicators Signals

The 100 SMA is crossing below the longer-term 200 SMA on the 1-hour chart to signal that the path of least resistance is to the downside. In other words, sellers could regain the upper hand and lead to another test of the nearby support at $14,000.

Stochastic is also pointing down to indicate that selling pressure is present while RSI appears to be turning back south from its climb. A break below the channel support could mark the start of a longer-term selloff.

But if bulls continue to charge, the price could test the area of interest around $16,000 next then make its way up to the resistance at $17,500 or higher.

Market Factors

Dollar demand has taken a hit after China hinted that it might trim its holdings of US Treasuries. However, it has also been reported that China ordered closing down of bitcoin mining operations as a step further in curbing cryptocurrency activity in the mainland.

Regulation is a pain in the neck for bitcoin price these days as ETF applications have been withdrawn in facing SEC scrutiny while South Korea continues to clamp down activity as well. With that, traders appear more interested in other altcoins that are cheaper and facing fewer barriers.

US PPI is due next and could provide an indication of how inflation readings might turn out, thereby influencing Fed tightening expectations. Downbeat results could mean more dollar weakness, which bitcoin price could take advantage of, while upside surprises could trigger a channel breakdown.

Keep in mind, however, that US equities have retreated lately on fresh NAFTA concerns that might keep risk aversion in play.

Ted Rogers, the president at Xapo, one of the most widely utilized bitcoin wallet platforms in the global cryptocurrency market, firmly emphasized that bitcoin is still the most sound money in the market.

Bitcoin is the Reserve Currency of Cryptocurrency Market

Over the past few months, the alternative cryptocurrency (altcoin) market has overtaken bitcoin, based on its dominance over the global market. While bitcoin remains as the most dominant cryptocurrency in the global market, it is no longer more valuable than all of the other cryptocurrencies in the market combined.

The decrease in the dominance index of bitcoin has been triggered by the rapid rise in popularity of cryptocurrencies such as Ethereum, Ripple, Bitcoin Cash, Cardano, along with digital tokens from initial coin offering (ICO) projects.

But, Rogers stated that bitcoin is still one of the only forms of sound money in the market that is currently being dominated by digital tokens and altcoins. He wrote:

“The altcoin/ICO mania of recent months is a circus of intellectual laziness, gambling and greed. Just hold to one central truth: bitcoin is the most sound money – the best money – human civilization has ever known.

Folks, I do think the ICO is important innovation, ETH has value as platform (not sure fair to call it ‘altcoin’) & we are headed for tokenized future. But ‘overvalued’ is trading at P/E of 20 instead of 15, worthless tokens with market caps of billions is Bosch and Bruegel madness. Period.”

Investors and analysts including Rogers firmly believe that bitcoin is the reserve currency of the highly volatile cryptocurrency market, as it is one of the few cryptocurrencies that is being utilized at a large and commercial scale internationally, apart from Ethereum which is processing more than 1.2 million transactions per day.

The market valuation of Ethereum can be justified, as Rogers suggested, given the value of decentralized applications launched on top of its protocol. But, the valuation of the rest of the cryptocurrencies in the market, remains questionable.

What Happens With Bitcoin?

Bitcoin and other major cryptocurrencies like Ethereum, Litecoin, and Bitcoin Cash tend to move together in a similar trend while digital tokens or ICO tokens move differently. If a massive sell-off from highly overvalued ICO projects and digital asset occurs, the money will not flow into fiat currencies. Rather, it will likely flow back into bitcoin and other legitimate cryptocurrencies.

If so, when bitcoin regains dominance over the global market, its market valuation will be able to surpass the trillion dollar mark, as analysts including billionaire investor Mike Novogratz stated earlier this month.

“Bitcoin could be at $40,000 at the end of 2018. It easily could. There’s a big wave of money coming, not just here but all around the world.”

Bitcoin Price Key Highlights

  • Bitcoin price appears ready for another selloff as price has formed a head and shoulders pattern on the 1-hour chart.
  • Price has yet to break below the neckline around the $14,000 major psychological support.
  • The chart pattern is approximately $3,000 tall so the resulting drop could be of the same height.

Bitcoin price is forming yet another selloff signal on a short-term time frame, but technical indicators are looking mixed.

Technical Indicators Signals

The 100 SMA is still above the longer-term 200 SMA on this time frame to suggest that the path of least resistance is to the upside or that the rally could continue. However, the gap between the moving averages has narrowed significantly to show that a downward crossover and and pickup in bearish momentum is imminent.

A break below the neckline could take bitcoin price down to the $10,000-11,000 region next while a bounce could lead to a move up to $15,000 then the highs at $17,000.

Stochastic is pulling up from the oversold region to signal a return in buying momentum while RSI also appears to be slowly heading north as well.

Market Factors

Dollar demand has once again ticked higher on record high Treasury yields, as well as record closes for equity indices. Traders are now looking ahead to a positive earnings season scheduled to start on Friday, and these upbeat expectations are likely to be sustained as tax reform kicks in.

Meanwhile, bitcoin price continues to reel from the hesitation among ETFs facing SEC regulation. A couple of funds withdrew their applications, citing pushback from the financial watchdog. Direxion Shares ETF Trust secretary Angela Brickl wrote:

“On a call with the Staff on January 5, 2018, the Staff expressed concerns regarding the liquidity and valuation of the underlying instruments in which the Fund intends to primarily invest and requested that the Trust withdraw the Amendment until such time as these concerns are resolved. In response to the Staff’s request, the Trust respectfully requests withdrawal of the Amendment.”

This cryptocurrency is also losing ground to its altcoin rivals, as well as equities that are performing better.