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Bitcoin Monthly Forecast – February 2019

Colin First

Bitcoin suffered sharp losses during the month of January 2019 with BTCUSD pair seeing a continuation of bearish price action from December 2018. The pair traded in a range bound action well within December month’s highs and lows. Bitcoin is likely to suffer from another bout of bearish price decline purely because of the nature of the asset. Cryptocurrency by default is a decentralized currency and does have the backing of any economy or government whose condition could be used as a fundamental standpoint to determine its worth. Also given lack of a centralized regulatory body, the price action in the broad market is purely dependent on news based momentum and investor sentiment based price action which is pretty self-evident from monumental rise and fall of the value of bitcoin and other major cryptocurrencies in recent past. The overall price action was bearish as visible from weekly chart with candles forming a staircase pattern painted in red. The first week of January 2019 saw relatively positive price action as bullish price rally from the year-end holiday season in December 2018 trickled into first week’s price rally. Owing to the fact that Bitcoin had managed to establish a rally above $3500 market which was sustained for prolonged durations, investors believed that BTC/USD had found a bottom and was now on rebound price action.

Delay in Approval of Bitcoin ETF & Futures Were Key Factors Leading To Bearish Breakout

This caused a fresh wave of fund influx in crypto market and bitcoin began its steady climb towards critical resistance level at $4000. While the pair managed to breach strong resistance and trade above $4000 handle for quite some time, the rally was short lived as said price level proved to be a very tough hurdle to scale with bulls lacking the strength to climb any higher. Having hit a hurdle above which price didn’t seem to climb higher investors decided to book profit from recent positive price rally. This caused the pair to lose almost all gains made during the year-end holiday season and the first week of the year. However true to market belief, $3500 handle had enough supply to prevent further declines resulting in the pair managing to sustain hold above psychological support level. Bitcoin also found some support from news that Bitwise had reached out to SEC for approval of Bitcoin ETF to be traded in NYSE Arca. The pair then saw range bound action during the third week of January as risk appetite still remained high in the crypto market ahead of much awaited ETH network upgrade and this kept the pair locked in range bound action between the price range of $3500 to $3800 respectively. Bulls were further supported by headlines which hinted that Russia was considering converting a better part of its monetary reserve into Bitcoins in order to escape the impact of U.S. Sanctions.

However, news of cryptopia hack which saw exchange lose assets worth nearly $3 million US Dollars and ETH network upgrade being delayed owing to the last-minute discovery of security vulnerability which would allow hackers to steal ETH tokens via re-entrancy attack added bearish pressure to market resulting in bearish close for the week. However further declines below the critical support level at the start of the fourth week of January was avoided owing to the news that United Nations has partnered with IOTA in order to make use of the latter’s technology which provides an open-source distributed ledger for data management in a bid to improve the efficiency of UNOPS operations. Further news that Ethereum on-chain transaction volume hit an all-time high in December despite bearish market conditions according to a report recently published by crypto analytics firm Diar added positive influence to crypto market bulls. However, bears were also gaining strength in the market as news hit the market that Cryptopia actually suffered losses worth $16 million USD as opposed to earlier reports of $3 million and that CBOE withdrew its request for ETF approval citing ongoing partial shutdown of US government as deadlines approach as the reason.

Downside Is Path With Least Resistance Moving Forward

Further, delay of much-awaited BTC futures debut in Bakkt platform owing to delay in SEC approval increased investors woes giving market bears the strength to breach psychological support level of $3500 and see further declines during the weekend. News of profit warning from Chip-making giant Nvidia and worries over Canadian crypto exchange QuadrigaCX exchange going offline for hours while investors haven’t been able to withdraw funds for several months added to investors woes at the start of the trading session in last week of January dragging the BTC/USD pair to monthly lows of $3369.19. However a short burst of positive price action and news of CBOE refilling for Bitcoin ETF approval now that U.S. government has reopened helped the pair gain some positive price action in the broad market and close last week of January on a positive note. Moving forward the month ahead is likely to experience bearish price action as bulls lack fundamental support to establish a positive price rally. News driven momentum is the only hope for positive price action now, but there are no events or news expected in near future that could provide BTC bulls a bullish boost. Near the end of February, the crypto market will see ETH network upgrade take place on a rescheduled date but the same is unlikely to create any major impact as investors now await headlines relating to ETF and BTC futures approvals from U.S. SEC. Approval of Bitcoin ETF & Futures from SEC is expected to bring fresh fund flow from huge private investors and financial companies which will act as fundamental support to lift Bitcoin back to its glory days ahead of which range bound action with bearish bias is expected to continue, Even when looking from technical perspective, downside is the path with least resistance as price is trading well below 20, 50 & 100 moving average in daily chart and RSI, Stochastic momentum indicators are moving with downward incline but yet to cross oversold territory which supports possibility of steady downtrend action in month of February 2019.

This article was originally posted on FX Empire