This Is Why Bitcoin’s Big Rally Is Not Over

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Three Reasons Why Bitcoin Price Rally Has Stalled

Omkar Godbole

Three Reasons Why Bitcoin Price Rally Has Stalled

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  • Extremely overbought conditions and other factors seem to have stalled bitcoin’s promising price rally.
  • Acceptance below $4,912 would validate signs of indecision on the weekly chart (doji candle) and open the doors for a deeper drop to $4,527 (200-day moving average).
  • A break above last week’s high of $5,347 would invalidate the weekly chart doji candle, although an immediate rally to $6,000 looks unlikely with the daily RSI still flashing overbought conditions.

Bitcoin’s recent price rally has stalled and signs of indecision are evident in the market just a week after a big bullish breakout.

The leading cryptocurrency closed at $5,190 on April 7, confirming an upside break of a bearish channel – the same pattern that paved the way for a bull market in 2020.

So far, however, the follow through to that bearish-to-bullish trend change has been anything but bullish.

The cryptocurrency witnessed two-way business last week, clocking a high and low of $5,347 and $4,912 before closing almost flat at $5,162.

So, the rally looks to have stalled due to the following three factors:

Overbought conditions

Bitcoin’s 14-day relative strength index (RSI), a widely followed technical indicator, jumped above 70.00 on April 2, signaling overbought conditions as the price jumped over 18 percent to highs above $5,000.

With the price climbing further to a 4.5-month high of $5,345, the RSI rose to near 90 levels, the highest since December 2020.

An extreme overbought reading is considered a sign the rally is overdone and is usually followed by a reaction – a price pullback or a consolidation, as is the case currently with bitcoin.

Prices then made numerous failed attempts to convincingly scale $5,300 in the eight days before a drop to $4,912 on April 12.

Bearish volume divergence

Bitcoin’s 24-hour trading volume across all cryptocurrency exchanges, as calculated by CoinMarketCap, doubled to $21 billion on April 2, validating the bearish-to-bullish trend change signaled by the break above the key resistance of $4,236 and the rally to $5,000.

As the cryptocurrency extended gains further to a fresh 4.5-month high of $5,347 on April 8, though, trading volumes tapered off to $17 billion, reinforcing the overstretched conditions reported by the 14-day RSI.

Hence, the pullback to $4,912 (Friday’s low) was not surprising. Prices have recovered by more than $200 over the weekend, but volumes are down further, to $10 billion. So, the recovery could be short-lived.

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Forcing out weak hands before building breakout

The financial markets often test buyers’ resolve by revisiting former resistance-turned-support before building on a major bullish breakout. And that seems to be the case here.

For instance, BTC cleared the 100-day moving average (MA) hurdle on Feb. 19. The newfound support, however, was put to test multiple times in the 10 days to March 4 before a sustained move higher.

On similar lines, prices fell back below the psychological support of $5,000 last Friday and may drop even further to the 200-day MA, currently at $4,527, as the average is widely considered a barometer of a bullish/bearish trend.

The case for BTC shaking out weak holders with a drop to the 200-day MA looks stronger if support a $4,912 is breached.

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Weekly chart

On the weekly chart, BTC created a doji candle on Sunday, which is widely considered a sign of indecisive market. Interestingly, the doji appeared following a high-volume falling channel breakout. So, it could be considered a sign of bullish exhaustion.

Acceptance below $4,912 – the low of the doji – would confirm buyer exhaustion, opening the doors for a deeper pullback to $4,527 (200-day MA).

4-hour chart

On the 4-hour chart, BTC could be creating the right shoulder of a head-and-shoulders bearish reversal pattern.

A break below the neckline support at $4,988 would create room for a drop to $4,629 (target as per the measured move method).

As of writing, BTC is changing hands at $5,142 on Bitstamp, representing a 2 percent gain on a 24-hour basis.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

5 Reasons Why This Bitcoin Rally Is Different Than 2020

In This Article

If you were around in 2020, you’ll know that reaching $10,000 was a major milestone and was followed by a year-long bear market. However, there are multiple reasons which clearly suggest that this time is different.

Bitcoin BUY NOW is roaring back against all odds and, by many accounts, is stronger than ever. However, is this merely another bubble or are we due for another significant Bitcoin bull run which will push the market leader to new all-time highs?

Here are 5 reasons why, this time, things are different for Bitcoin.

Less Active Addresses

If we compare where we are now to the top of 2020, there are 24 percent fewer active addresses today. This means that we have not yet reached the frenzy that caused the bubble in 2020.

Chart courtesy of coinmetrics.io.

Network Fees Are Cheaper

With the implementation of SegWit (segregated witness) and transaction batching, transactions are significantly cheaper on Bitcoin now compared to in 2020.

Although still averaging around $2 or so, it’s a far cry from the $40 in transaction fees at the top of the bull market in 2020.

Chart courtesy of bitcoinfees.info.

Bitcoin Hash Rate Is at All-Time-High

Miners are becoming better and more energy-efficient.

Ultimately, the number of computation work done on Bitcoin’s network is growing and is now at an all-time high. What this means is that the network is fundamentally more secure than it ever has been.

The Media Hype Cycle Has Not Even Started Yet

We may have broken $10,000 but, by all metrics, it’s hard to tell.

Bitcoin’s Google search interest is only a tiny fraction of what it was in December 2020.

Likewise, the media has been slow to pick up on this recent rise.

Facebook’s Cryptocurrency Has ‘Legitimized’ Bitcoin

Regardless of what you think of the Libra, it has brought much publicity to the cryptocurrency space.

Although we can debate whether or not it really is a cryptocurrency, Libra did, for sure, do one thing right — it brought free publicity to the entire industry. That’s good news for Bitcoin and the entire cryptocurrency space, overall.

Although we are reaching the price levels that created the ‘mania’ phase in 2020, this time it really is different by all estimates.

It remains to be seen at what price point the ‘mania’ or ‘bubble’ phase of this rally will begin. Some are even speculating we may reach 6 digits this time around.

Do you agree that things are different this time for Bitcoin? Let us know your thoughts in the comments below.

10 Reasons Why Bitcoin Will Fail

For people outside of the complex and exciting world of cryptocurrency, Bitcoin can be hard to understand. Many have brushed it off for years, saying that it was a fad that would disappear as quickly as the value of Beanie Babies. However, with the price spiking in the thousands of dollars for a single Bitcoin, naysayers are suddenly singing a different tune. Newcomers are dumping their money into Bitcoin, hoping that the price will only continue to grow.

Many old-school investors who haven’t done their research will simply say it’s in an economic bubble and call it a day. But the reasons why Bitcoin cannot succeed in the long run go so much deeper than that. Just like any other speculative asset, no one really knows what is going to happen in the future. However, when one looks at the big picture, it becomes clear that Bitcoin will struggle to survive.

10 Blockchain > Bitcoin

The most valuable thing about Bitcoin is that it introduced blockchain technology to the world. Blockchain technology drastically improves the speed, privacy, and security of sending money. Bitcoin can be sent from one person to another without a middleman, and it encrypts everyone’s identity to a long string of letters and numbers called a “wallet.” Blockchain is a big deal. Its potential to change technology is as big as the Internet. At the moment, the world of blockchain is young and exciting, like the Wild West of the digital world.

However, even though Bitcoin was the first to introduce blockchain to the world, it’s not necessary for blockchain to exist. Sort of like if one web page goes down, the Internet still exists. Most people never saw the very first website that was ever created. It was a blank white page that was titled “World Wide Web” and a list of text links. That’s it. [1] No one could have ever imagined that that seemingly unimpressive page would evolve into what has now become what the Internet is today. There are already bigger, better, and faster versions of blockchain that made improvements on the original Bitcoin, like Ethereum and Ripple. Both of these coins, or “cryptocurrencies,” are already available on the market.

9 Big Brother Is Watching

One of the biggest benefits of Bitcoin it that it is supposed to be private, secure, and untraceable. Obviously, this was a huge benefit for criminals on the Dark Web. Cryptocurrency got a really bad reputation once news broke that Bitcoin was being used to send money anonymously on the drug trafficking website Silk Road.

The appeal that a lot of Americans see in Bitcoin is that they believe they can avoid paying taxes to the IRS, which is also a crime. It’s tax evasion. In 2020, 44 percent of the Bitcoin supply belonged to people who identify as Libertarian. Today, the market has way more newcomers, so the percentage of Libertarians is much smaller as more casual people join to invest in hopes of getting rich, rather than trying to start a revolution.

What casual Bitcoin users don’t seem to understand is that even though their name is protected as a string of numbers and letters on the public ledger, that doesn’t mean they are fully anonymous. Most Bitcoin exchanges like Coinbase require that new users must upload the front and back of a Photo ID as well as take a selfie to prove that it’s really them. In Coinbase’s privacy policy, they state that they will keep your name, address, phone number, and more for up to five years and will give it to law enforcement if there was ever a subpoena. [2]

The FBI has made it very clear that they are watching Bitcoin very closely, and they are getting better and better at finding the true identities of the people who use Bitcoin for illegal activity. They are fully aware that not everyone who uses Bitcoin is a criminal. In fact, they have a public dossier of their educational materials given to law enforcement to help them understand what it is. There are plenty of ways for hackers to hide their identity, but for the casual user, they are not getting any added expectation of privacy from Bitcoin. At this point in time, the only way to truly have an anonymous and untraceable financial transaction is with cold, hard cash.

8 The Lack Of Leadership

Bitcoin was created by the man of mystery, Satoshi Nakamoto. While there are many compelling theories about his true identity, no one knows exactly who he is. At the beginning of the Bitcoin project, Satoshi was able to guide the coders who helped create the platform any time they had a question. Once investigation agencies all over the world began searching for him, Satoshi Nakamoto disappeared. All over the world, homes of suspected Satoshis have been raided. Despite law enforcement’s best efforts, his true identity is still a mystery.

Now, coders and miners must come to a consensus every time a decision about Bitcoin’s future must be made. Unfortunately, the community cannot seem to agree on even the smallest decisions. There is no clear business plan mapping out Bitcoin’s future. In fact, the Reddit community message boards had to split into two totally separate Bitcoin groups, because opposing opinions wanted to continue to talk inside an echo chamber instead of getting along. [3]

Other cryptocurrencies actually have leaders to guide them. Vitalik Buterin is the boy genius creator of Ethereum. Harvard-educated Brad Garlinghouse is the CEO of Ripple. Both Buterin and Garlinghouse met with central banks and the Federal Reserve in October 2020, but Bitcoin did not have a seat, because there is no leader to represent them.

7 Laws And Regulations

In October 2020, China declared that it was illegal to create an “ICO,” which stands for “Initial Coin Offering.” Start-up companies were learning how to use blockchain to make their own spin-off coins to raise funds. The only downside was that a lot of these coins were fraudulent. A few fake coin companies took millions of dollars from desperate people who were trying to invest so they could “get rich” on these ICOs.

In New York, all businesses who want to accept Bitcoin are required to register for a “BitLicense” if they want to do business. The license promises to comply with United States taxation laws and regulations. The application costs $5,000, and there are 500 pages of legal paperwork that would require a team of taxation lawyers to decipher. For most businesses, it’s simply not worth the money, time, and effort to accept Bitcoin when so few people will actually use it in their stores. [4]

In 2020, the IRS released a guideline that anyone who profits from digital currency needs to pay taxes in the same way that anyone selling their stocks or bonds must pay their taxes. If the Bitcoin revolutionaries stick to their morals, they aren’t going to listen to the IRS. When there is such a huge spotlight on an activity that is known for tax evasion, it is obviously something that law enforcement takes notice of.

6 Use Cases

Many small businesses in California’s Silicon Valley accept Bitcoin as a form of payment, but larger corporations still only accept cash and cards. Unless Bitcoin can actually buy and sell things with bigger companies, they will never actually have very much of a purpose, since blockchain technology can exist without Bitcoin. The Journal of Government Financial Management says that blockchain technology can truly help the financial system, but they need to see more successful examples of use cases, first.

At the moment, the one and only digital currency that is actually working with the US Federal Reserve is a company called Ripple. They have proven that they can work with large corporations, banks, and credit card companies. They’re even going to process the financial transactions of American Express. Ripple has their own cryptocurrency, called XRP.

All of the original ideas for possible use cases for the blockchain are actually coming true through Ripple, not Bitcoin. In October 2020, Bill Gates announced that he chose Ripple to run his project that will help alleviate poverty in developing nations, despite having promoted Bitcoin in the past. [5]

5 Time And Mining Problems

The longer Bitcoin exists, the more difficult it becomes to “mine,” or create new coins. Without the miners, the Bitcoin network collapses. The cost of getting started as a new miner is so far out of reach for the average person that the main miners are gigantic warehouses in China. In most countries, the cost of electricity to run these computers is actually more than what the digital currency is worth, which makes it pointless to even try.

The longer Bitcoin exists, the longer it takes for these computer systems to process the information. At the time this article was written, the official time for a Bitcoin transfer is “one hour,” but anyone who uses Bitcoin on a regular basis knows that is far from the truth. Transactions can take up to six hours at busy times of the day, because it averages 15 transactions per second. There is no guarantee that it will ever improve. In fact, it is likely to keep getting worse. [6]

In contrast, Ripple’s coin XRP settles 1,500 transactions every second, and they have the technology and infrastructure to make sure that they’ll never slow down. In the digital age, where people want things to happen within a split second, it is simply not realistic to think that as the world slowly begins to understand and use blockchain in their everyday lives, they will choose the slower option, Bitcoin, over currencies that are faster.

4 Fear, Uncertainty, And Doubt

The current Bitcoin market is extremely volatile. If Bitcoin is in the news, its price can fluctuate hundreds of dollars in a matter of hours. Fear, uncertainty, and doubt are talked about so often in the community that everyone just calls them “FUD.” If there was ever any reason for the public to believe that Bitcoin may become illegal, if there was a hack, a virus, or any other issue in the system, the value will drop dramatically as people panic and sell as quickly as possible. It’s very similar to the stock market in that way.

If the Great Depression and the 2008 recession were any clue about the future, people will sell without hesitation if they lose faith in Bitcoin. Without any clear vision of where Bitcoin is going, there is very little for an investor to count on or to have faith in. Many people have been rewarded for holding onto their Bitcoins for dear life, but good news can only last for so long. [7]

3 Will The Real Bitcoin Please Stand Up?

Since the Bitcoin founder Satoshi Nakamoto is no longer publishing his opinions, all coders have left is the documentation he left behind. One person can read the same exact paragraph in the Bitcoin White Paper and come up with a totally different interpretation of Satoshi’s words than the next person. There are a lot of people who believe that in order for Bitcoin to survive, there needs to be a mass exodus to another platform that would be faster and more reliable.

Developers have come up with a solution called a “hard fork,” which is why Bitcoin Cash was created. However, they believed that Bitcoin Cash still did not solve the problems, so there was a much-contested plan to create yet another hard fork called Bitcoin Gold. That plan, known as SegWit2x, was eventually called off, and it resulted in another sharp spike in the price of the original Bitcoin. [8]

As of 2020, the amount of Bitcoin that Satoshi Nakamoto owns is now worth billions of dollars, and he has made it clear that he is done with the project. He could possibly be on a private island enjoying life while coders continue to argue over which coin gets to be the “real” Bitcoin.

2 The One Percent Hate Bitcoin

Billionaire Jamie Dimon, the CEO of JP Morgan chase, has called Bitcoin a fraud and says that it is destined to fail. He said that even if the price of one Bitcoin rises to $100,000, it would not change his opinion that it is destined for failure some day. [9]

Every single year, Toronto hosts a banking conference called the Swift International Banking Operations Seminar (SIBOS), where some of the most powerful people in the world meet. The major company that runs the convention is called Society for Worldwide Interbank Financial Telecommunication (SWIFT). They are in charge of what the world currently uses for banking transfers. One individual bank moves billions of dollars every year. Almost all of the banks in the world use SWIFT’s now-outdated technology, and they handle quadrillions of dollars.

At the October 2020 SIBOS, SWIFT CEO Gottfried Leibbrandt said during an interview that their company is trying to come out with a technology that will improve security, anonymity, and speed. It’s easy to read between the lines and know that what he is really saying is that they want to make their own blockchain. However, he claims that it will take them over a year to actually get their technology up and running. Ripple was so confident that they can beat SWIFT that they they purposely scheduled their own conference, called SWELL, at the same time and location as SIBOS. Their party-crashing resulted in successfully adopting hundreds of new banking partners to use their technology. The one percent aren’t threatened by Ripple the way they are by Bitcoin.

1 The End Of The World As We Know It

The most enthusiastic supporters of Bitcoin are revolutionaries. Some hope that people will rise up and choose to go with Bitcoin instead of using traditional banks. Michael Lewis, the author of Moneyball, was encouraged to talk to these Bitcoin revolutionaries in Silicon Valley, because it might make for good material for another book. He watched as the revolutionaries very literally sat around smoking weed and talking about their ideas of the future, and he left feeling as though Bitcoin was going to fail. He decided not to write a book on the subject. [10]

In order for these revolutionaries to get what they want—people losing faith in banks and switching to Bitcoin—the economy of the world as we know it would have to collapse. If that actually happened, people would have to lose their jobs, their homes, and maybe even their lives. Active revolutionaries who are pushing for a collapse are in short supply.

While they’re not necessarily one and the same, a member of Anonymous told Vice News that many of the members have left and that the organization is full of distrust. Others make false promises and never act out on their plans of revolution. For the most part, it’s just kids writing on the Internet about how they want the world to change, without a real plan on how to execute it. If one revolutionary group like Anonymous can fall apart, what’s to stop Bitcoin from suffering the same fate? Even if they could change everything in an instant, would they really be prepared to push the big red button to begin the end of the world?

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