21 January 2020

Bitcoin - Trend Reversal Accomplished

1) Review

Since our last analysis on December 5, 2019, Bitcoin actually actually fell to a final low of $ 6,425 on December 18, as expected. The above-mentioned mark of $ 6,500 was thus achieved almost exactly.Since this final sell-off, Bitcoin quotes have recovered very significantly. It has peaked at $ 9,188, an incredible 43% increase in just four and a half weeks. With this, the Bitcoin proves once again how promising and volatile the still young asset class of cryptocurrencies is.Hardly noticed by the public, Bitcoin was one of the best investments last year. Although the prices in the six-month correction more than halved from the end of June, the bottom line was an increase of almost 93% over the year! Palladium followed in second place with an increase of almost 55%.In mid-December, despite the phenomenal annual performance, there was depression and panic among crypto investors. Exactly this extremely pessimistic sentiment laid the foundation for the brilliant recovery of the past few weeks.Overall, the Bitcoin has started the new year excellently. At the beginning of the year, the downtrend line that had been in place since the end of June was skipped, which led to a direct rise to the 200-day line ($ 9,027).

2) Bitcoin chart analysis in US dollars


Source: Tradingview

The long-term upward trend in December withstood the attacks of the bears on the weekly chart. With three long wicks, the weekly candles signaled significantly increasing demand from buyers at prices below $ 7,000 from November. In addition to the final low of $ 6,425, there was a positive divergence in the stochastic oscillator, as the indicator no longer confirmed the lower low. Overall, Bitcoin corrected 54% from the high at the end of June at $ 13,880 to the low in mid-December at $ 6,425. However, since that low of $ 6,425, quotes have been able to recover dynamically and quickly break the downtrend channel after a brief skirmish in early January. The sharp rally has so far ended at the well-known resistance zone of $ 9,000 to $ 9,300.
A look at the weekly chart should now make it clear that Bitcoin with a stochastic buy signal in the back will probably head for the decisive resistance zone at $ 12,500 to $ 14,000 again or by detours by summer. Here the further fate then decides. If it rises above this zone, quotes are likely to continue to run up to an all-time high of $ 20,000. This would make the bull market intact again and significantly higher prices would only be a matter of time! On the other hand, if bitcoin fails as clearly as in the summer of last year in the area of ​​the 61.8% retracement at $ 13,372, the bear market is still not over.

In summary, the weekly chart is bullish without any question! There is still enough space up to the overbought zone so that Bitcoin could easily reach the resistance zone of $ 12,500 to $ 14,000 by summer. If the breakout succeeds here as well, not much is missing at the all-time high.


Source: Tradingview

On the daily chart, Bitcoin has risen significantly in the past four and a half weeks, reaching its still slightly falling 200-day line ($ 9,027). This moving average is more likely to act as resistance at first and could therefore cap the bulls' efforts for now. The overbought stochastic also speaks for the need for consolidation and correction.
Typically, the broken downtrend channel could therefore be tested again from above in the coming weeks. Depending on how quickly Bitcoin is corrected, the lowest prices are expected in this scenario up to a maximum of approximately $ 7,500. It is also conceivable that Bitcoin will find support and turn much higher. At very short notice, there is much to be said for a reset in the range of approximately $ 8,150.

In conclusion, the daily chart is currently overbought and therefore calls for caution and patience. Now is not the time to panic after the already departed train. Rather, those who didn't use the ideal $ 6,500 to $ 8,000 buy zone in the last quarter should stagger between $ 8,150 to $ 7,500 for entry points in the coming weeks.

4) Derivatives market structure Bitcoin

Bitcoin Futures Jan 20th 2020

Source: Barchart

Although the Bitcoin Future has only been traded since December 17, 2017, the CoT report (Commitment of Trades), which is published every Friday evening, offers an interesting overview of the positions and is always helpful in analyzing the Bitcoin market. The focus is usually on extreme constellations and the basic positioning of "professional money". The professionals (also called commercials) have so far hardly been active with the Bitcoin Future, since there are not yet many investment products that need to be hedged about the future.
In the course of our analysis, the subgroup of the so-called "Other Reportables" with a very successful countercyclical approach has emerged in the past two years. The group of "Other Reportables" is not listed individually in the normal CoT report and represents all reportable traders who cannot be assigned to one of the three groups of producers, swap dealers or money managers.
In the correction from the end of June to December of last year, the "Other Reportables" not only covered their high short position, but even turned their cumulative positioning to long overall. They were fully invested at their low point in mid-December and were able to reduce their long position in the brilliant rally in the last four weeks! With the numbers reported last Friday, the “Other Reportables” are now 651 contracts short again. You can't actually play Bitcoin much better. Your current positioning coincides with the expectation that Bitcoin will need consolidation and will probably trade sometime sideways between around $ 8,000 and $ 9,000.

Overall, the analysis of the current CoT report provides a small warning signal. Especially since the small speculators (= amateurs) are heavily involved on the long side, while "smart money" and "Other Reportables" are slightly positioned on falling prices.

4) Sentiment Bitcoin

Bitcoin Optix Jan 20th 2020

Source: Sentimentrader

Bitcoin Sentiment Jan 20th 2020

Source: Crypto Fear & Greed Index

Bitcoin Fear and Greed Jan 20th 2020

Source: Crypto Fear & Greed Index

In mid-December sentiment fell to a low due to the almost six-month correction in the sector. Both Sentimentrader's Bitcoin Optix and the much more extensive "Fear & Greed Index" provided countercyclical buy signals at this time. The lowest point in the "Fear & Greed Index" was seen exactly on December 18 with values ​​of 15. Once again, sentiment analysis has proven to be the supreme discipline. Especially in the extremely fluctuating crypto sector, chart-technical brands like to be overrun. Significant anxiety and panic among the majority of market participants, however, provide excellent countercyclical buying opportunities, as in all other markets.

After the sharp increase in recent weeks, the mood is now slightly too optimistic. Based on the sentiment analysis, a wait-and-see attitude is therefore currently recommended. However, if one assumes in the larger picture that the pendulum usually swings from one extreme to the other extreme, it would still be a long way up to exuberant optimism or irrational greed. That A little caution is advised in the short term, medium and long-term Bitcoin has considerable potential for growth from a sentiment perspective.

5) Seasonality Bitcoin

Bitcoin Seasonality Jan 20th 2020

Source: Seasonax

With the brilliant start to the new year, Bitcoin has currently been quite clearly ahead of its seasonal pattern established over nine years. In statistical terms, however, there was usually a sideways phase in the first three to four months. It is not until mid-April that a strong upward trend prevails on average.Transferred to the current situation, the currently overbought situation could be reduced with a sideward consolidation lasting several weeks. The next upward wave would then be expected from March or April. Seasonality only provides negative signals from mid / late June.The seasonal component is initially neutral until the beginning / middle of April.

6) Bitcoin against Gold

Bitcoin vs Gold Jan 20th 2020

Source: XE

Bitcoin currently costs 5.55 ounces of gold. Conversely, you have to pay 0.179 Bitcoin for an ounce of gold! Overall, gold has significantly upgraded against Bitcoin in the past six months! However, since the beginning of the year, a Bitcoin has already become 0.7 ounces of gold more expensive! The Bitcoin / Gold ratio runs into a triangle in the big picture. The direction in which this huge triangle is being resolved cannot currently be reliably predicted. But it is important that you are aware of this constellation. Because as soon as it is dissolved, one of the two asset classes should dramatically upgrade against the other.
Basically you should be invested in both asset classes. That At least 10% and a maximum of 25% of your total assets should be invested in precious metals (primarily physically), while in cryptos and especially in Bitcoin you should hold at least 1% and a maximum of 5%. If you are very familiar with crypto currencies and Bitcoin, you can certainly allocate higher percentages to Bitcoin. For the normal investor, who is of course primarily invested in stocks and real estate, 5% in highly speculative and highly volatile Bitcoin is a lot. If the triangle is resolved in favor of bitcoin, a higher bitcoin weighting is recommended.

7) Conclusion and Recommendation

The correction to Bitcoin that started in late June 2019 is likely to have ended. The bulls are now back on track and could easily drive Bitcoin prices up to the crucial resistance zone between $ 12,500 and $ 14,000 by summer. Given the dynamic nature of the sector, higher prices are also conceivable. The ideal opportunity to start is already behind us. There may be an exhalation and slightly lower courses in the next few weeks. If the former downtrend channel is tested from above, prices in the range of $ 7,500 are conceivable. On the other hand, if the bull market is already strong, the maximum setback is likely to be in the $ 8,150 range.

Overall, the Bitcoin makes an extremely strong and promising impression. Any clearer reset is probably a buying opportunity. In the long term, new all-time highs towards $ 30,000 plus X are expected under the given circumstances.

Florian Grummes
Precious Metal and Crypto Expert


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Author: celticgold.eu

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