Here is the current chart setup:
You might wonder why these levels crop up like this and there are afew alternate or perhaps contributing reasons.
In the past these were natural equilibrium points where the market felt comfortable the price was right. This level is likely to be ‘right’ on the way down too.
People bought in to the instrument at this price, got hooked on the never ending rise and rode the price back down and this is their ‘get out without a loss’ level. It happens in reverse where losing investors hold till they ‘get their money back’ and then sell.
People look to these levels as support and its a self fulfilling prophesy
It could just be a random fluke but so far its paid/panned out.
So lets zoom in.
If you pardon the phrase, this is a noisy bottom. A tight range suggest market certainty, wide movements of volatility means uncertainty. The trouble with uncertainty is that is is most often a bearish signal because few want to commit to investor or speculate when they aren’t sure, as such volumes fall and that makes the market vulnerable to selling and a leg down.
Simply if Bitcoin goes much below the lows of November I could easy get my $2500 target. Then it will be a case of will there be a final capitulation down to $1000.
I don’t see $1000 but the market, especially one that is in panic wont care about my opinion. This is where the chart comes in, it tells you the mind of the market and that is useful.
Now there is an issue about Bitcoin hash rate. If the price fell to far below a commercial minable level then the bitcoin block chain could stop. Imagine the price collapsing tomorrow and left 2016 blocks unmined until the next difficulty retarget. (It not that far off at the moment but this is for illustrative purposes.) Say the price hit $1000 and no one could mine profitable below $2000.
Each coin would generate $1000 loss and for the whole retarget chunk, that’s 25,000 coins. The industry would have to lose $25m just to retarget bitcoin to profitability. Who would step in and do that. Chances are the Bitcoin blockchain would stop and panic ensue and prices fall to $500 or lower. This would doom Bitcoin.
It’s a worry but happy the new generation of mining ASIC can make a profit at the current difficulty at $1000, so if the BTC price did drop, while most miners might stop, these new mining ASIC would continue and the blockchain would tick even if it was 1 block an hour.
So we can rest easy about the Blockchain freezing for now and if the Bitcoin blockchain slows it will create a counterforce against the price drop as people bump up their transaction fees and juice up the value of the blocks.
I cant imagine this level will hold for long but up to now I’ve expected things to happen faster than they have. I continue to pick up small lots of BTC and I’m still waiting to dive in at $2500.
Meanwhile over in equities I’m awaiting the crash there.
2019 will provide buying opportunities in both.