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Bitcoin Price Review
We will be starting this report off by looking at the BTC price action since our last report. In our last report we looked at a BTC short term bullish and bearish scenario. BTC has fulfilled neither scenario with lots of sideways action since the last report, trading within the $8500 USD and $10,000 USD region. Although within this sideways movement, the BTC bearish scenario was the closest to being correct.
In the last report for the BTC short term bearish scenario, the report firstly stated that BTC would see resistance at $9100 USD. There would subsequently be a clear break below this, sending BTC down to $8500 USD, the 0.236 Fibonacci level.
This short term bearish BTC scenario happened somewhat with BTC seeing a 12% price loss, breaking through the $9100 USD resistance level until BTC hit a price barrier at $8700 USD, rather than $8500. After BTC failed to break below the 0.236 Fibonacci, BTC rose above the $9100 USD resistance all the way to current prices with BTC hovering around the $9500 USD level. BTC is down 2% since the last report.
Bitcoin Bullish Scenario
As we can see here, there is a clear pennant formation because of the upwards trend before the formation; this indicates that the price will continue to rise. A similar situation happened in April earlier this year, as shown below:
What is supporting the BTC bullish scenario?
The BBs are currently being squeezed, suggesting that significant price movement is imminent. BTC attempted to move into the lower regions of the BB last week, although the bears failed to push BTC below the $8500 USD support. BTC has now moved into the upper regions again, which suggests that the next move will be one of a bullish, rather than bearish, nature.
The bullish scenario which would see BTC break $10,000 USD, is also supported by the Parabolic SAR, showing that BTC currently has momentum on its side. As we can see in the chart below, the SAR is currently underneath BTC, this is a bullish signal when combined with the current state of the BBs:
Bullish LT Scenario Conclusion
In the long term bullish scenario, the first thing BTC will need to do is break the purple resistance line. BTC may see a slight drop towards $9200 USD before testing the purple resistance line.
Once this purple line is broken, BTC, in this scenario, will rise to $10,000 USD. This is a key level which will need to be broken – the psychological resistance created by the extra figure should not be underestimated; however, in the bullish long term scenario, BTC will move above $10,000 USD rising firstly to $10,500 USD where resistance may again be found. This resistance will be broken, just like the $10,500 USD, and will see BTC rise to $12,500 as 30% gain from our current position. Once the $12,500 USD resistance has been reached, revaluation will need to be taken.
Bitcoin Bearish Price Scenario
In the BTC bearish scenario, rather than seeing a pennant formation, there is a broken upwards trendline which has been retested, in a very similar fashion to the start of the year.
In the chart above, BTC has broken its upwards trend line. This trend line has been retested, although it failed to break back into the previous upwards trend line. It has also failed to break above the red resistance line, similarly to the start of the year. This coincides with BTC struggling to break the $10,000 USD resistance level.
In February 2020, after BTC was unable to make a major move above $10,000 USD, BTC then proceeded to form a pennant similar to the one seen currently.
Here, rather than break above the downwards resistance created by the pennant, BTC fell below the upwards support of the pennant triggering a major fall in the BTC price; this was after a long bullish move spanning over two months.
If we look at the current pennant which may have formed, it is surprisingly similar to the one from the start of the year.
In the bearish scenario, the current pennant (like the one from the beginning of the year) will break below the upwards support line, rather than a break above. If BTC has a significant break above $10,000 USD, then the bearish scenario will be invalidated.
Bearish Scenario Supporting Indicator
The MACD has seen a bearish crossover on the 4-hour chart, alongside the continued bearish crossover on the daily view. In the bearish scenario, this indicates that BTC will not rise higher than $9600 USD, and that the cryptocurrency will likely fall to $9000 USD in the coming days.
The short term fall to $9000 USD is also supported by the break of the short term upwards trend line, which has recently been broken, as demonstrated below:
How far did BTC fall in the previous bearish scenario?
When BTC broke its pennant in February 2020, BTC then proceeded to retrace to the 0.5 Fibonacci retracement level. This resulted in a 15% loss from $10,000 USD. BTC did fall further, although this was due to the COVID19 panic selloff.
How far will BTC fall – bearish scenario BTC
In the bearish scenario, in order for it to play out, it must firstly break below the 0.236 Fibonacci retracement. After the 0.236 is broken, the next level is the 0.382. In the bearish scenario, this is highly likely to be broken, although pushing lower towards the 0.5 looks much less likely. In the bearish scenario, the downwards price movement is likely to be a corrective wave rather than an impulsive move down. This means that in the bearish scenario it would be unlikely that the 0.618 level would be tested.
Therefore, if the bearish scenario plays out, we would see the following decrease in price dependent on certain levels:
- 236 – 10% price loss – likelihood in scenario – certain
- 382 – 20% price loss – likelihood in scenario – likely
- 500 – 27% price loss – likelihood in scenario – improbable
- 618 – 35% price loss – likelihood in scenario – highly unlikely
AAB Price Review
Since the last report published on May 19th, AAB has had a poor couple of weeks in comparison to the rest of the cryptocurrency market. AAB has decreased 9% since May 19th, although has now reached the key 0.618 Fibonacci retracement level from AAB’s ATHs.
AAB bears running out of steam
As we can see from the RSI chart below, AAB has been below the 50 level for 18 days. Prior to this, we saw the bulls in charge with positive price movement from the 1$ release of AAB on AAX until AAB reached ATHs. During the 18 days, AAB has been in the oversold area of the RSI, even dipping below the very oversold 30 mark at times. This shows us that the bears have been in control over AAB recently, although this appears to be coming to an end.
Bulls likely to step in at 0.618
The recent selling pressure has created a descending wedge formation, as shown below:
When descending wedges form with an original upwards trend, this typically points towards a positive breakout. The descending wedge formation is common in cryptocurrencies and is typically highly accurate. Although AAB is still within the wedge, a significant move above the wedge, a break above the 0.5 Fibonacci level would confirm further positive movement; however, a negative break where AAB would test the 0.236 level would confirm further bearish movement.
Break above scenario
In the break above scenario, we would firstly see AAB halt at $1.27 USD. From there, AAB would then break above 0.5 Fibonacci resistance – momentum would subsequently switch and see AAB reach 0.382 + 13% from our current position. The momentum carried from the break above, and the reclamation of power from the bears to the bulls, could see AAB even reach ATHs again.
Break below scenario
In the break below scenario, AAB would see a significant move below the 0.618 level. AAB would then proceed to drop to the 0.786, potentially heading back to $1USD, although a 100% retracement would seem unlikely. A drop down to 1 would see AAB lose 21% of its current value.
There has been lots of economic news since our last report, with countries and companies attempting to adapt to the current social and economic troubles currently seen across the globe. Companies are continuing to go under, although this is undoubtedly at a lower rate due to government support. The following is some significant economic news which has taken place since our last report:
- Cath Kidson have announced the closure of all its 60 UK stores. The popular homeware and fashion retailer will be making over 900 people redundant, although are continuing to sell their products online. The retailer has been hard hit after it was forced to close all stores by the UK government; however, it appears that the UK lockdown rules are the nail in the coffin after Cath Kidson posted an operating loss of over $20 million USD in 2018.
- Jeff Bezos has announced that he will be investing in Beacon. Beacon is a British start up aiming to change the way in which supply chains operate. The investment from Bezos is a part of a $15 million USD fundraiser. With Beacon founded by two former Uber executives alongside Jeff Bezos (a specialist in supply chains) with a successful fundraiser, the future of Beacon is looking bright.
- Lufthansa has accepted the demands set by the European Commision in return for a $10 billion USD government bailout.
- Alphabet have postponed the release of the Android 11 operating system for mobile devices due to the current unrest in the US. Stock prices have been relatively unaffected by the news.
- Venezuela has demanded that the UK hand over $1 billion USD worth of Venezuelan gold stored in the UK, allowing them to fund their COVID19 response; however, the gold has not been handed over due to the UK not recognising the leadership of Maduro as legitimate.
- In 2018, the US had 155 million people employed. The number of unemployed citizens in America has now reached 40 million – a huge reduction in employed US workers.
- The Bank of England has announced that the economy looks set to shrink by 14% in 2020. This is the worst slump seen in 300 years, with the economic picture looking ever grimmer for the UK; however, The BoE predicted a bounce back with an economic growth of 15% in 2021.
- The World Bank has pledged $500 million USD in order to help Middle Eastern and African countries deal with locust swarms. The swarms are putting pressure on food systems already under heavy stress with droughts seen across several African countries in 2019.
With cryptocurrencies ever moving forward let’s have a look at some of the biggest news stories since the last report:
- China Merchants Port, China’s largest port operator, have reached an agreement with Alibaba. The agreement has created an allowance for the development of blockchain technologies. Blockchain has the potential to vastly improve supply chain management, and a variety of other areas, that are key to the operations of China Merchants Port. Alibaba has been pushing forward with blockchain technology, allowing for increased traceability and transparency for consumer products. Alibaba allows online shoppers to source logistical information of their goods with Alipay, enabled with the integration of blockchain.
- Tether (USDT) has overtaken XRP as the third largest cryptocurrency by market cap. XRP has been one of the worst performing alt coins over the last couple of years, seeing huge periods of devaluation with unremarkable recoveries. Meanwhile, the adoption of USDT by traders and investors has exploded, with USDT seen as the perfect way to hold monetary value during times of uncertainty. The use of USDT futures contracts has also increased dramatically, with the cryptocurrency a seemingly unstoppable force against other dollar tied cryptocurrencies for example, USDC or BUSD. The fall from grace from 2017 prices of XRP, alongside the legal debate of whether XRP is a security, has seemed to shake investor confidence in the asset contributing to the decrease in market capitalization.
- Gemini have partnered with Samsung for cryptocurrency wallet integration on devices. The partnership will allow users to buy and sell cryptocurrencies on their Samsung device alongside the transfer of their cryptocurrencies to cold storage.
This external intelligence report was written by Oliver Page, and commissioned by AAX, for marketing and educational purposes only. The views, analyses and projections are based on the author’s independent research. The report should not be taken as a form of investment advice.