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Over the last couple of weeks we have watched BTC and the other major cryptocurrencies move into dangerous territory below the main support bands; an area where dramatic moves are much more likely. Attempts to rally back into the safety zone over the last couple of weeks have failed, and the market looks to be building up to a more aggressive move down. Like a forest fire, such a capitulation move on high volume could finally represent a much-needed cleanout of remaining bullishness, allowing the shoots of a new bull market to take hold. Remember, the bottom isn’t in until everyone is thoroughly demoralised.

I’m starting today by looking back in time at the recovery from the 2014 top once again. It’s not an identical repeat this time, but I think the action is rhyming sufficiently for the exercise to be useful.

Bitcoin

BTCUSD daily chart 2014

Chart 1: Bitcoin daily in 2014

Back in February 2014, Bitcoin established major support around $400 (point 1).

This was finally taken out in October (point 2), whereupon that support became resistance and the low of the move created a new, weaker support line.

When this lower support level was finally breached in Jan 2015 (point 4), Bitcoin entered a low-support ‘danger zone’ just as it is in right now. A very fast move down ensued, resulting in a capitulatory high-volume panic washout. Although it was retested a few months later, this spike down ultimately proved to be the base of the next bull market.

BTCUSD daily chart

Chart 2: Bitcoin daily

Coming back to the present day, we have a similar duality of support levels. This time the main support was successfully defended at point 2 (NB: the entire cycle is accelerated this time), but a secondary support line was still created. In the last couple of weeks we’ve seen both of these broken (point 3).

Short-term (days at most) a relief rally is looking likely. However unless we see bulls manage a surge back above the secondary support/resistance line, a similar capitulatory move to 2014 is on the cards. For long-term investors this would be a good thing, offering a potential entry point and setting the scene for the resumption of the long-term uptrend channel shown.

The target for such a move is $4288 (slightly revised from our $4637 call last week). This would put us squarely in the super-long-term uptrend channel.

For more on where that channel comes from please see the Market Roundup here.

Ethereum / Ripple / Litecoin

Since the situation hasn’t changed materially I’m not posting new charts for these today. On an expected capitulation move from BTC I still see the following unchanged targets

  • Ethereum: $350
  • Ripple: $0.27
  • Litecoin: $74

The rationale for each is on the Market Roundup from 2 weeks ago.

DISCLAIMER
BCB Group has no position or opinion on the price of Bitcoin or any other cryptocurrency and this article should not be construed as analysis of or advice regarding the current or future market price of Bitcoin or any other cryptocurrency. No analysis of the price movements of BTC or any other cryptocurrency or any other asset provided by BCB Group should be construed as an invitation or inducement to buy, sell or otherwise to trade BTC or any other cryptocurrency.

Jon Cotton

Jon Cotton

Strategy and Execution Partner

Jon is BCB’s head strategist, with an emphasis on market intelligence. An expert in behavioural science and highly experienced chartist, Jon has been providing BCB’s clients with crypto and macro technical analysis since 2017, and has quickly gained a reputation for accuracy after accurately calling the December 2017 top and August 2018 bottom.

Jon is also MD of British music production company Poseidon. He began studying technical analysis in 2000 due to its overlap with behavioural economics – much used in Poseidon's international marketing work, which has seen the company achieve three iTunes US number one albums among other notable successes.