Hello Midas Community!
Today we will continue with our series of weekly TA articles on Bitcoin. As we have said before, Bitcoin is the king of cryptos, and as Bitcoin moves so does the whole market. It is the “rising tide that floats all boats.” We believe that if we provide the community with good Technical and Fundamental analysis, it will help to determine an overall market direction. That being said, this should not be considered financial advice. All information herein is the opinion of the author. Do your own research before making an investment decision.
Let’s get started!
Price Analysis
Finally some action!
Here we see on a low timeframe that Bitcoin has finally broken out of its weeks long consolidation period. It’s about time! As we have said in our previous analysis articles, the direction was leaning bullish, but could go either way. Bitcoin is currently hanging out around the $9,400 mark, which is a key resistance for it to continue further to the $10k major resistance zone.
Looking at the 4H chart for confirmation, we can get a visual for the neutral wedge pattern that has been forming since early June. Forming lower highs and higher lows, Bitcoin’s volatility has been decreasing steadily for at least 6 weeks. The general consensus is that the longer this pattern continues, the larger the breakout (in either direction) will follow.
The above chart includes moving averages, which still show as bearish but with a bullish (upward) divergence. The 20 and 100 MA are still below the 200, but are inclining upward, indicating that a bullish cross is coming in the next few days. Of course, this is only the case if Bitcoin sustains its gains.
There are two possible scenarios here:
- A bullish cross occurs in the next 24 hours. This would confirm Bitcoin’s movement.
- Bitcoin attempts to complete the MA cross but fails, and corrects back into a consolidation zone.
Let’s see if our other analysis can give us any indication!
Investor Sentiment
As expected, since the Bitcoin price movement is so fresh it is not yet reflected in the FGI, which is updated once daily. From the historical values, we can see that Bitcoin has been in the “Fear” zone for months now. My prediction is that after today’s move, the FGI will increase toward 50. I see this as a bullish signal.
If the FGI were already reading “neutral” i would be more tepid about Bitcoin’s upward mobility at this moment, and would expect a correction. Generally speaking, when the FGI reads as “fear” or “extreme fear” it is a good time to buy.
Fundamental Analysis
Bitcoin’s TH/s has been declining over the past week after posting new all time highs. This is understandable, since this indicates a congested mining network. With hash rates (mining competition) at all time highs and miners revenue down, it makes sense that some miners would be shut off and the network hash decline.
In order for Miner Revenue to go up, the price of Bitcoin must go up or the mining competition must go down. That, or transaction fees must go much higher. Historically, when mining revenue reaches a support level, it is a bullish sign. We are near the support level found in March when Bitcoin had its “flash crash” due to Coronavirus fears.
Analysis
Last week, we shared that Bitcoin’s “Hash Ribbon” indicator flashed its first “buy” signal in months. This signal was given on July 12.
Whenever this indicator has given a buy signal in the past, huge gains have followed in the weeks after. In 2017, it posted 93% returns in 122 days after the signal. In 2019, it made 277% in 166 days. In 2020, it made 45.3% in 48 days. What will it be now?
TLDR
- Here’s a quick recap:
- Price Analysis: Bullish
- Investor Sentiment: Slightly Bullish
- Fundamentals: Bullish
Consensus: Bullish
Even with today’s gains, Bitcoin’s upside potential remains strong. This could be the beginning of the next bull cycle. Let the games begin.
