technical Archives

Bitcoin Price Analysis: End of the Sideway Movement and Bitcoin All Set for the Next Big Launch

Posted on April 7, 2017 | by [email protected]

Anyone who has followed the Bitcoin price closely in recently would see a pattern Bitcoin prices have been following. From the second half of 2016, the month over month price of Bitcoin has been increasing steadily, irrespective of the type of negative fundamentals the currency had to deal with. Momentary price dips have been countered effectively to keep the Bull Run going up until the start of the New Year. However, the scenario changed from the start of 2017 with Bitcoin prices remaining predominantly sideways in between the $1000-$1250 range. Irrespective of the fundamental reasons, Bitcoin has consolidated enough in terms of volumes to prepare for a good run. Let’s look into how fundamentally and technically Bitcoin stands in terms of an impending run.

Fundamental Analysis

Bitcoin has been contained between $1000-$1250 by various fundamental factors which include the consecutive ETF rejection and the scalability debate. Now that the Bitcoin community seems to have come to some kind of compromise over the block size, the prices have stabilized. More importantly, the block size increase would now accelerate the transactions and increase the Bitcoin’s utility by a great margin. Things look more favorable now for a Bitcoin bull run owing to the dynamics in Japan and Mexico. Japan has legalized Bitcoin as a digital asset and a valid way of transfer starting from April 1^st. With 260,000 Japanese vendors all set to accept the digital currency, things are looking very bullish for Bitcoin.

In the western part of the world, Mexico has introduced a bill to legalize Bitcoin which would in turn fire up the remittance market and increase cross-border Bitcoin transactions. With strong adoptive fundamental factors driving the prices, Bitcoin looks charged up for the run.

Technical Analysis:

Technically, Bitcoin has been in a trend and has fallen into a temporary sideways pattern. While the market players are testing the $1200 psychological barrier (at the time of writing this article), the Bollinger bands suggest that a breakout can be expected, and, given the trend it can very well be in an upward direction. While the market still has the potential to drop till $1,100 before making a final launch, it would be wise not to short in such a market. Even the RSI Indicator is in the mid region showing that there is still buying potential in the market and it’s not advisable to short recklessly in the market.

You heard it here first.

Why IRS should adapt to Bitcoin and update its monitoring system

Posted on January 17, 2017 | by [email protected]

The problem with disruptive technology is that many a times, it affects the legacy systems rooted deeply into the ecosystem. The existing systems can’t catch up with the developments and end up tainting the innovation. Over a period of time, eventually the system accommodates the technology; but the real fear is in not letting it hamper further innovation. This is exactly what is happening with Bitcoin and IRS in USA. Bitcoin is all set to transform the existing monetary system and IRS is struggling to still acknowledge Bitcoin as a currency or as an asset. Instead it has attacked major Bitcoin exchanges and indirectly accused Bitcoin Users of Tax Avoidance. Let’s look into what exactly happened and how IRS should probably go about monitoring cryptocurrencies:

Coinbase fights IRS summons:

IRS issued guidance in March 2014 concerning income from bitcoin and “virtual currencies”. However, there has been no enforcement mechanism to ensure that bitcoin income is actually reported to the IRS. Having failed to create an enforcement mechanism, the IRS is taking a brute-force approach. The John Doe summons authorized on 30th November demands that Coinbase provide complete transaction records for all users between 1st January, 2013 and 31th December 2015. If the IRS succeeds in forcing Coinbase to turn over their records, this would be a massive invasion of privacy and guilt by association. Coinbase has filed to fight against these summons and the proceedings are underway.

Core of the problem:

Most of the experts feel that the problem lies in reporting Bitcoin transactions. There is no exact mechanism to monitor the filings and hence the problem arises. The reporting requirements aren’t exactly clear and compliance is very complicated. Buying and selling of a Bitcoin will result in a profitable or loss transaction. For bitcoin that was purchased or received on different dates, the value of each input comprising a transaction is subject to a gain or a loss. Reporting numerous transactions of this type requires upgraded technological framework. This framework has to accurately calculate the values necessary for reporting to the IRS adhering to compliance.

Possible solution for the problem:

Experts believe that to counter this problem, IRS needs to first update its tax guidelines. Secondly, a software system or computer protocol needs to be developed so that any user or investor of cryptocurrency can compile a report at the end of the fiscal year. The report shows unrealized gains and losses from their entire virtual currency portfolio. This can be handed to accountants in a format that is easily understood and accurate. This can in due course of time evolve to become a national standard.

Why Bitcoin Price drop shouldn’t be a surprise?

Posted on January 9, 2017 | by [email protected]

2017 started with a dream Bitcoin Bull Run with the cryptocurrency prices surging towards the all-time high. Before bitcoin enthusiasts could cherish the currency peak, there was a sharp drop in the price taking the currency back to $900 levels. Most people were shocked and disheartened about the abrupt shift in market dynamics. Market players started scurrying for reasons and comforted themselves with the circulating rumors involving China’s Policies. While it is true that China has always been a major influencer on Bitcoin prices, it might not be the driving factor here. Let’s look into why Bitcoin prices were bound to fall at peak levels and what would be the trajectory from here:

It’s all technical:

Bitcoin market has always followed the standard rule of currency markets: market trades all the regions adequately before moving to higher levels. It is very important to keep this in mind as market has always come back to trade low volume regions before resuming the Bull Run. This was evident when market went from $700 to $800 level and crashed back to compensate the lack of volumes.

Similar to that swing, market went from $900 to above $1000 with scanty volumes. Hence the crash was expected and the market came back to trade the low volume regions.

The peaks are always sloppy:

The prices have been bullish for most part of last year and the market has been trending. The only way this could have been halted was the effects of strong, long term and negative fundamentals. This happened for a brief period in 2016 when China announced capital controls on Bitcoin which lowered the prices. Later the sentiment settled and the market became trending in bullish direction.

When the market approached the peak for the first time in three years, the apprehension surrounding the speculation became very intense. With low number of buy orders at the top, traders and programmed algorithms can be set into a sell mode with little panic. With unstable market dynamics, the rumor acted as a catalyst for the quick crash.

What’s next?

Following the pattern, the market has consolidated at 78% Fibonacci Retracement level. Algorithms are coded to have strict adherence to these levels. Infact quick acting algorithms would be reason for the crash of the market which ignited a sell off. These $900 levels would be a better entry position to set oneself up for long-term trades. If the all-time high breaks, the market is bound to go very high with good volumes and strong support.