Long Term Outlook for (BTC-USD): August 25, 2018
The price of BTC/USD has been trading in a well-defined range on the weekly chart. The price of the number one cryptocurrency has largely been dictated by the various attempts at approving a Bitcoin ETF in the United States. So what is the outlook for BTC/USD at the present time?
On Wednesday August 22, the US Securities and Exchange Commission rejected 9 Bitcoin Exchange Traded Funds (ETF) applications, citing concerns over possible loopholes for fraud and price manipulations. Bitcoin and other major cryptos lost some ground as a result of this announcement. But in an about face on Friday August 24, the SEC’s Commissioners announced that they would review this decision.
This news, as well as expert opinion showing the road to an ETF, has sparked renewed buying interest in Bitcoin, albeit within the context of the technical ranges which will be explained below. The decisions on ETF approvals by the SEC are seen as key fundamental influences on Bitcoin prices, as a regulated Bitcoin ETF will attract the institutional investment that has been lacking in this market since inception. Moreso, many point to Bakkt, the new program from the NYSE as a step in the right direction as well.
The BTC/USD chart shown below displays a very clear picture of BTC/USD trading within a specific tight range.
BTC/USD Weekly Chart: August 25, 2018
- To the upside, we see a descending trend line which has served to place a cap on the price action since February 2018. This is the resistance line.
- To the downside, the support at $5,700 has held firm, and has served as an area from which prices have rallied all through the months of March to August 2018.
- The momentum indicator has formed three price troughs, with each one forming at a higher level than the previous one. This marks higher lows for the oscillator and could be pointing to a divergence situation.
- Price action is presently heading upwards after bouncing on the support line, on the back of the announcement of the Bitcoin ETF decision review.
So how does all this play out?
BTC/USD is range-trading at the moment. For the past three months, investors could buy on the bounce of the support, and sell on the rally to the descending trendline resistance. However, range trading is not as easy as that. There are important things to note. These are as follows:
- When the price candle/bar has approached the key level of support or resistance, does the candle closed below the support or above the resistance?
- If indeed the candle has closed above the resistance or below the support, then a breakout has occurred, which invalidates that key level and reverses its function. Reversal of function means that a broken resistance becomes a support, and a broken support becomes a resistance.
- If a breakout has occurred, the price will probably pull back to the broken level and will be rejected at that point, since the broken level has reversed roles. This opens the door for price to move in the direction of the breakout.
- If a breakout has not occurred, i.e. the candle failed to close above the resistance line or below the support line, then the range is still intact and it would be safe to buy at support or sell at a rally to the resistance.
Possible Price Moves
So what would be the outlook for the BTC/USD pair moving forward?
BTC/USD has already bounced off the support line, indicating that it failed to break below this line. BTC/USD is expected to maintain an upward push to the resistance level. This move may take up to 2 weeks to be completed. Therefore, any entries to the upside must be made on the shorter time frame charts such as the hourly charts. The entry must align with the direction of price action on the weekly chart which at the moment, is upwards.
The long term, mid-term and short term outlook of the BTC/USD pair is:
- Long Term – bearish
- Mid-term – neutral
- Short term – Bullish
Please note: this analysis was done on a weekly chart. It takes a whole week for a candle to form, so these moves may take several weeks to play out. Entries should be made on shorter time frame charts such as the daily chart.
This piece is for educational purposes only. Please do your own research before making any investments.
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Disclosure: I am/we are long BTC-USD.
Business relationship disclosure: This article was worked on in partnership with an analyst