While the Bitcoin price has been creeping to the upside recently, volatility has remained extremely low which means that trading opportunities has been limited. We are hoping for a return to a more exploratory price action soon, however, we may have to wait another week or two before conditions are conducive.
Over this past weekend Bitcoin developers gathered in Milan, Italy for the Scaling Bitcoin Conference, a two-day event focused on solutions to Bitcoin’s supposed scaling issues. This was the second of such meeting, out of a total of four scheduled so far. The main points of discussion were SegWit, block size, Lightning Network, and Sidechains, all unsurprisingly popular topics. Although there were no major announcements or developments that came out of the conference, Bitcoin’s price seemed to like the idea of devs coordinating on solutions that potentially avoids the pitfalls of a non-consensus hard fork. We think this is one of the reasons price has been able to move above the $610 resistance level over the past few days. Now that the market has digested that event, we think it is in danger of going back into hibernation until we get a more substantial catalyst over the coming weeks.
Moving on to the charts for a look at the medium to long technicals, we can see on the 3-day chart below that price remains in a broad, range-bound consolidation between the $450 Bitfinex Hack low and the $700 bull trap high from back in June of this summer. Also, notice that the market is trying to put in a local bullish market structure bottom at the 38.2% Fibonacci retracement level, a good sign for the bulls, while the A/D line continues to push to the upside signaling that buyers currently remain at these levels. Lastly, for the bull side of things, the 200-period SMA is maintaining its trend reversal to the upside and should be supportive down to the $400 level, while RSI and MACD are showing room to run towards the upside from a medium term momentum standpoint.
Having said that, Willy is almost officially overbought which tells us that near term momentum is getting stretched and is due for recharge, while price remains well outside of the volume profile value area. Speaking of volume profile, it continues to be porous all the way down to PoC around $250 and trading volumes remain anemic, although given how much time price has spent up at these levels we don’t think a move all the way back down there is likely. If anything, a quick move back down to test the $450 regional low would washout weak hands, fill in some technical trouble spots, and recharge the indicators for a resolution up and out of this bull market consolidation.
Overall it’s probably not hard to tell that we are looking for a breakout higher before year end, however, over the shorter term we are not nearly as sanguine. Given the lack of follow-through on the move above $610 over the weekend, as well as near term overbought conditions on most oscillators for the time being, we think there is a good possibility that the market stays trapped between the new $600 support level and the $630 resistance area for the majority of this week. Players still seem to be positioning for the range expansion that is bound to come sooner or later, which means that there is likely still some choppy, sideways action left before we get a more definitive, sustainable trend.