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venzen Jun 15, 2013 7:55am | Post# 1

Bitcoin technical analysis
 
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Bitcoin Technical Analysis

This thread is dedicated to technical analysis of the various Bitcoin and crypto-currency pairs. My own prefered method is Elliott Wave analysis combined with Fibonacci relationships in price action as a means of understanding past action and forecasting future price behaviour. However, analysis amd discussions in this thread are not restricted to these methods.

With the general "newness" of crypto-currencies and the amount of hype surrounding them - and Bitcoin specifically - this thread will serve both as a knowledge exchange as well as a repository for sound technical analysis of the rapidly evolving crypto-currency market.

Brief introduction to Bitcoin

Bitcoin is the most well-known of a range of crypto-currencies presently in circulation. The currency (forex code: BTC) is a digital value token that is accounted for by a decentralized peer-to-peer network comprised of it's users - both buyers and sellers. The same cryptographic algorithm that encrypts and transfers BTC around the network is also responsible for a slow release mechanism whereby a total maximum of 21mil BTC will be released in the course of a just over a century. The logic behind this gradual release strategy is to ensure scarcity in an emulation of resources such as Gold. In an extention of the simile, Bitcoins come into existence through a process called "mining".

BTC has received a lot of media attention following the crash of its speculative bubble in April 2013. Similarly, press attention has focussed on recent cases of non-compliance with US financial regulations by some Bitcoin exchanges.

BTC buying and selling is possible via several exchanges, the biggest (by daily volume) of whom is currently Mt.Gox. A few retail brokers offer BTC option contracts, but long and short CFDs are generally not available except through smaller start-up brokers.

Official website: http://bitcoin.org/en/

Charts: http://bitcoincharts.com/charts

Infographic: http://www.totaltrader.com.au/11891/...tion-standard/

Bitcoin price history

Bitcoin started trading at 0.04USD in 2009 and achieved an unprecedented growth of more than 5,000% in 3 years before crashing in April 2013.

Click to Enlarge

Name: BTCUSD_6hr_Jan-June16_2013_TEMPLATE.png
Size: 98 KB

From April to June 2013, BTCUSD has consolidated around the $120.00 price level.

Brokers

Personally, I use the Mt.Gox exchange and their API which gives me direct access to the largest BTCUSD market without an intervening broker. Mt.Gox charges 0.6 % on all BTC purchases (no fees for selling). Some brokers provide long/short contracts and binary options but these do not suit my current trading strategy with Bitcoin. Mt.Gox is, unfortunately, prone to price feed disruption and their order system can lag severely during market frenzies. For this reason I prefer not to participate during busy times, placing my orders and positions during quiet periods.

Forum Rules

Surprizingly, the thread topic generates a fair amount of emotion and often leads to dicussion involving polarized opinions. To prevent wildfires and maintain a professional tone in this thread, the following ground-rules will apply to any and all members and guests posting here:

  1. This thread exists for co-operative technical analysis of Bitcoin and crypto-currency price charts.
  2. Posts should respect the thread topic and may veer from it for the sake of knowledge sharing related to the topic.
  3. Posted forecasts and predictions should preferaly be accompanied by a chart or other technical object illustrating your statement.
  4. Racist, sexist, homophobic or any other form of hate-speech will not be tolerated or condoned in this thread.
  5. Strong language does not serve the purposes or tone of a public forum, hence you should choose your words and bear others in mind when posting. At the discretion of the thread creator/moderator members and guests may be asked to edit their posts.
  6. Swearing or derogatory language directed at another poster is unacceptable and the author of such will not be protected from the Forex Factory Moderators.
  7. Disruptive or objectively negative posters will be blocked from posting without prior discussion.
  8. I, venzen, have absolute say-so, up to the last word and that is final.


Limitation of Liability
The analysis and wave counts in this thread are personal interpretations and are speculative. As per common sense, please do not construe any advice given (or implied) as a trading recommendation. The poster will not be responsible for any losses you incur as a result.


venzen Jun 16, 2013 1:33pm | Post# 2

At June 16, this is my prefered count for BTCUSD.

Price action seems to be in an ongoing correction of the April top, reverting to a mean around 120.00. If the correction is near completion, then we can expect any wave up to trace out a rapid five wave impulse to the previous correction highs around 160-170. Anything else would mean a protracted correction that could last several months.

The purple bar at the 60-80 price range is the level of the 2nd wave of the extended 5th that made the April top. Accordingly, the correction has already touched this previous baseline and by rights the correction may be over, hence my alternate count. Should BTC make an upward blast as drawn in blue, this may be a speculative 3rd wave. To my mind, BTC displays characteristics of the commodity asset class which tends to swing wildly without any perceivable upward progression.

However, for now I wait to see what price does. If the indicators show any divergence on new price lows I will open a mid-size position and add to it should price make lower lows. The Mt.Gox orderbook shows a massive concentration of Buy orders below 20.00 so I do not expect price to stay below 50.00 for more than a few minutes. My initial target for the upthrust is the previous correction high of 167.00 - the 50% fib retracement of the crash. If the sideways action continues then it is a simple matter of letting the indicators dictate actions to I, robot!

http://ubuntuone.com/7RZufaYNLNN9cOmCucwdY8

Luis Carlos Jun 16, 2013 3:27pm | Post# 3

Hi venzen gl with the thread

venzen Jun 16, 2013 9:21pm | Post# 4

Hi venzen gl with the thread
Hey Luis! Thank you and best wishes to you too - your input here is always welcome

Yuri57 Jun 17, 2013 11:58am | Post# 5

Anything that can lose half of it's value in 1 day is worthless.

venzen Jun 18, 2013 12:56am | Post# 6

Anything that can lose half of it's value in 1 day is worthless.
Yuri, I understand your scepticism, but remember the bigger picture: following massive rallies (speculative bubbles) almost all market instruments have at some point in the past lost half (or more) of their value in a crash. This is normal price development and is known as the 2nd wave in Elliott Wave terminology. Such occurrences can be found in most currency pairs, the indices (Dow, FTSE, etc) and commodities. As a trader it is your job to apply TA to extreme price movements and get out with profit if there are warning signs of a pending correction.

What we see in the Bitcoin chart, in my opinion, is an asset in early development and with massive upside potential. There are some dangers, such as banning in the US, or cryptographic code cracking, but until these become issues, Bitcoin represents a good instrument to trade - and easy - the BTCUSD price action plays out like a textbook indicator lesson probably because the Bitcoin market is young and there is no central bank meddling.

Welcome and please read the Forum Rules on Page 1

Yuri57 Jun 18, 2013 1:02am | Post# 7

Sorry, but I don't understand your optimism. After an instrument rips off 80% of the investors only the fanatic still believe it would go up again.

If it's a textbooks play, sell at 50% backtest and don't look back.

mikeinaa Jun 19, 2013 10:35pm | Post# 8

I doubled my money on the wave just behind the main wave. This was a no brainer wave to me. Easy to spot and trade. I think of bitcoin as a bit of a gamble. Anytime something can cause it to crash. Unless there is a perfect setup then I stay out. If price drops below $80 USD then I may get back in. but for now ..

I have noticed that price is respecting pin bars on the 4 hour chart.

venzen Jun 20, 2013 12:11am | Post# 9

I doubled my money on the wave just behind the main wave. This was a no brainer wave to me. Easy to spot and trade. I think of bitcoin as a bit of a gamble. Anytime something can cause it to crash. Unless there is a perfect setup then I stay out. If price drops below $80 USD then I may get back in. but for now .. I have noticed that price is respecting pin bars on the 4 hour chart.
Welcome mikeinaa,

check the forum rules and enjoy the thread!

I agree with you about it respecting the technicals very well. It's kind of unusual the way it turns on RSI and Stochastic extremes... I often don't believe it will, but sure enough come the indicators/candles and Bitcoin reacts.

I notice a lot of media talk of manipulation of the price but I don't see this: as far as EW analysis goes - the price action is textbook. Perhaps because it is not widely traded... there is no obvious connect to what the USD does: the USD strength induced by the Fed last night does not seem to affect the BTCUSD...

You mention 4hr charts... which platform are you using?

venzen Jun 30, 2013 8:32am | Post# 10

PA has slowly edged lower along the bottom of the Fibonacci Fan TL. Reviewing the wave formations today I notice that PA since late April looks ery much like a triangle for subwave b of wave B. Price could now make one more low (in wave e of the triangle) before breaking out to the upside in 5 waves. The strength of the upward thrust and the internal structure of the unfolding waves should give some clues as to PA's intentions.

Having said that, there is still the potential for massive downside. I have not shown this on the chart, since it may look hystrionic in print!
Recent PA down from the label b (late May) could be the first 2 waves of a 5w wave C. In this count the first 5w structure down would be labelled "1" instead of "c" and the 3w upward move labelled "2" instead of "d". The likelihood of this count is reinforced by the fact that wave "2" ("d" on the chart) had retraced 61.8% of wave "1" ("c" on the chart). If this count is indeed the case we may see BTCUSD below $50 in strong sell-off!

However, for now I am sticking with the count shown in blue on the chart below.

http://ubuntuone.com/5hR7eJnwjBzTGMWwcIYBFV

mikeinaa Jul 4, 2013 12:06pm | Post# 11

Pin bar forming at 80 on the daily after a push down. Time to enter long. Looking for 120

Primadonna Jul 4, 2013 2:28pm | Post# 12

To me anything below 70/60/50 is a buying opportunity.
People are now dumping bitcoin becase of a move failure into higher prices. I belive will keep happening.
The dynamic is like this:
Price drops.
people buy.
people hold for some time waiting for price to go up.
IF it doesnt happen for some time, people will get fed up and dump again their holdings.
price moves to a new low
and repeat the same process.

It will end when prices rally away from it. then we can see some piick up on volatily and volume again.
I belive if prices goes up again media will start to pay attention (again) and more people will gather in. #volatility

venzen Jul 7, 2013 2:53am | Post# 13

To me anything below 70/60/50 is a buying opportunity. ... It will end when prices rally away from it. then we can see some piick up on volatily and volume again. I belive if prices goes up again media will start to pay attention (again) and more people will gather in. #volatility
Welcome Primadonna!

check the forum rules (my standard first reply).

Interesting comments and good point about media attention. As @mineinaa also mentions, we are now entering a resistance area (potentially demand zone) below 70 and may have to see 50/55 tested as a previous low and 'psych' level.

Strange how the media have failed to comment on the recent lows. I think when we start seeing articles about "Bitcoin collapse" and "Bitcoin gloom" as well as big names expressing negativity, then the contrarian buy signal will sound!

heartless Jul 18, 2013 11:29am | Post# 14

{quote} Welcome Primadonna! check the forum rules (my standard first reply). Interesting comments and good point about media attention. As @mineinaa also mentions, we are now entering a resistance area (potentially demand zone) below 70 and may have to see 50/55 tested as a previous low and 'psych' level. Strange how the media have failed to comment on the recent lows. I think when we start seeing articles about "Bitcoin collapse" and "Bitcoin gloom" as well as big names expressing negativity, then the contrarian buy signal will sound!
Hello venzen.
yes, if you see those 'bitcoin demotivationals' and price is dropping then its becase dumb money is leaving the market, a good buy opportunity.
You would like to trade with dumb people, its sure a win on the long run.

FatimaYo Aug 12, 2013 10:25pm | Post# 15

Hi Venzen

Very interesting thread really
Very instructive, keep on the good work
(I am Fatima Rugatu, I also follow your threads there)

Cheers

venzen Aug 24, 2013 6:45am | Post# 16

{quote} Hello venzen. yes, if you see those 'bitcoin demotivationals' and price is dropping then its becase dumb money is leaving the market, a good buy opportunity. You would like to trade with dumb people, its sure a win on the long run.

deary me... that is so.. so heartless!

thanks for the headsup heartless and as you can see from PA we're heading for another downtrend.

venzen Aug 24, 2013 6:47am | Post# 17

Hi Venzen Very interesting thread really Very instructive, keep on the good work (I am Fatima Rugatu, I also follow your threads there) Cheers

Hi Fatima! Good to see you here! Yes, I have been preoccupied with other trades for the past few weeks and my activity at Rugatu has been, well, zero. I will email you as discussed!

venzen Aug 24, 2013 6:53am | Post# 18

Right, thanks to the banks we have a good handle for our wavecount. TA this weekend is intense with everything going on after the FOMC non-event, so I have to get busy with multiple tasks in multiple charts. I'm not going to discuss any analysis here except to say this: BTCUSD is going down in 3 waves and could reach at least the previous lows in the 60s price range. Let's see what lows print and then update the count. The bounce off the bottom might just send Bitcoin north to follow Gold and the USD in the coming "higher rates" era.

http://ubuntuone.com/5mfwrCEJNKtsUdfgaDAXBQ

Rag2RichesFX Aug 24, 2013 7:28am | Post# 19

I'm curious about the liquidity in this market and why anyone would ever trade it when there are more liquid options out there (like national currencies)

I can't imagine there is even a billion in daily turn over


Although isn't the basic premise behind bitcoin is that it should appreciate over time because the coins become harder and harder to "mine"?




Anyway, I'm sure the best way to trade bitcoin is simply to look at the USDx.
Still.. not seeing the point


Good luck with it though! It could be a much bigger market one day.

venzen Aug 24, 2013 1:34pm | Post# 20

I'm curious about the liquidity in this market and why anyone would ever trade it when there are more liquid options out there (like national currencies) I can't imagine there is even a billion in daily turn over Although isn't the basic premise behind bitcoin is that it should appreciate over time because the coins become harder and harder to "mine"? Anyway, I'm sure the best way to trade bitcoin is simply to look at the USDx. Still.. not seeing the point Good luck with it though! It could be a much bigger market one day.

hi R2R and welcome,

You raise a good point. The liquidity is tiny and the market is immature but this has its advantages:

1) surprising predictability from a PA perspective as well as textbook adherence to classic indicator reversal signals
2) the primary exchange Mt Gox charges a commission on buys (but not on sells) and that is all it costs to participate - there are no account fees, the access to their feed and its API is free of charge and there are no intermediaries: buy and sell BTC and convert to fiat currencies as you wish. Transactions are instantaneous and you can transfer all of your holdings to your desktop whenever you wish.
3) volatility (for the nimble and quick)

It's not really a conventional trade instrument - the buy commission and lack of short selling makes intraday trade unprofitable, instead I view it as a longterm buy-and-hold wealth store On tops I convert Bitcoins to USD and at bottoms buy BTC again and maybe add.

Longterm the Bitcoin should either appreciate strongly (if there is demand) or fade away into the dustbin of history. But I think the arguments in favour of massive appreciation are stronger than those in favour of disuse and worth a few hundred dollars speculation.

BTW - to my eyes it doesn't correlate to the USD index and charts more like a stock - look at that "internet startup" bubble up to April!


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