Bitcoin price has slowly gained alttude in a non-committal rise to $450. This analyst keeps questioning why the market compulsively buys price up when the technicals are pointing down. Some say that perhaps the market is trading the expectation of a block reward rally.
Time of analysis: 14h00 UTC
From the analysis pages of xbt.social, earlier today:
Price keeps rising steadily from the crash low and there seems little concern from the buyers for what they’re buying into.
Price remains below the 1-hour 200-period moving average (red) and the momentum indicators are running out of upside at this timeframe.
RSI is reverse diverged to the previous high (magenta annotations).
The stocahistics (top) have slammed to their upper extreme and MACD has overshot its zero-line as the bulls over-eagerly pile into what may appear to be a resumption of the advance.
The technical factors that inform the notion that this is not advance include:
1) the rounded shape of the recent top,
2) the rounded, forward leaning shape of the current upward correction,
3) the established chart pattern that downward price moves consist of at least 3 waves – this is the 2nd; and
4) a bearish 4-hour chart – that, if it breaks down, will pull the 1-day chart into a bearish technical state.
Denial is a terrible thing that never acieves its goal. It only wastes the time and energy of everyone involved. Eventually, denial must yield to what had been self-evident reality all along. Plainly stated: There is no rational reason for bitcoin price to rally – the chart bias is bearish; this is not June; and, the block reward halving will not, in actuality, affect miners’ running costs for another two months.
Pumping market capitalization prior to a subsidy halving is a false economy that only benefits the recipients of the subsidy – think about it. A higher bitcoin price, during the next two months, will neither save any faltering mining operations, nor will it increase mining diversity after the weakest players leave the field. So, what is the rationale behind this mythical halving rally that’s got the market eagerly buying every other day? Pump the price of the current 25 BTC subsidy, and then have price sell-off when the subsidy has halved? Good idea! Seriously, who could possibly think this is a worthwhile endevour? No, Khaosan, the rally only happens after the halving event. Oh really? So, buying – today – into an alleged rally two months from now is premature?
After June the mining industry will receive half the bitcoin protocol subsidy it receives today. The Bitcoin protocol is transforming into a fee subsidized network (as opposed to block reward subsidized). Some miners will have to close shop, the rest will make up the shortfall via increased fees. Many will try their best to survive. Living and conducting business in a fiat-based global economy as we do, when cashflow pinches (during a double-whammy global slowdown and reward halving), does one buy more bitcoin or do you cash out bitcoin for the sake of fiat denominated running costs?
By piling into a rally now, buyers will be funding many operations (some of them large exchanges) whose only option is to sell bitcoin.
Bitcoin price is nipping at $450 (Bitstamp) as another bull trap cooks up in the chart. The buyers may attempt another high at the compulsive sell zone near $470, but beyond that seems an unrealistic expectation. The largest players have been conspicuous by their absence in the volume indicator, and are most likely waiting for discount lows at the support floors near $400 and $300. Ironically, these lows may print during June and July when miners cash out their bitcoins during a recessionary hard place.
What do readers think? Please comment below.
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