The Chinese bitcoin markets decided to dump heavy on boxing day while western traders were celebrating the holidays. The boxing day sell off brought prices down for a retest of $400 support. The CNY/USD pairs fell down lower than the USD markets.
Prices have been retracing upwards to $430, which is a 50% retracement. On the CNY charts, we see that the price has retraced closer to the 61.8% level on the Fibonacci retracements. There is currently a massive bear flag which could lead to another dump and retest of $400.
Today the Chinese markets popped with a large green high volume spike. If the price doesn’t break 61.8% then this spike may be a bull trap and a long squeeze. This will likely make the drop down even bigger, especially if longs get margin called.
Alternatively, prices would need to break $450 USD for these markets to look like a recovery.
Our current trading range is between $400 and $475 USD. A breakdown below $400 will likely bring prices to $380 and a breakout above $475 may lead to a test of $500.
$500 is an important area to break and can lead to rapid gains. As mentioned in previous reports, a strong $500 breakout may show a progressive growth and a retest of $1000.
It’s possible prices may pivot off of $350 before making the next leg up. Bitcoin needs to stay above $300 support, otherwise we’re back in the bear channel of 2015.
Bullish Market News
China has devalued its currency again today. Combine this with tight capital controls and you get a recipe for people flocking to bitcoin.
Bloomberg announced recently that bitcoin was one of the best performing investments of 2015.
There’s a rumour that the MMM Global Republic of Bitcoin ponzi scheme has halted withdrawals and may be on the verge of collapse.
Ponzi schemes can put lots of buying pressure on the markets because they need to continuously double to stay in business.
Last time we saw a major crypto ponzi scheme was during the litecoin pump last summer. Once the scheme failed there was a massive dump on the markets and litecoin lost over 50% of its value.
Blocksize Debate Continues to Rage
Tensions amongst bitcoin developers flared again recently. There’s been more infighting within the bitcoin community about increasing how much data can be placed inside of a block.
This type of politics can shake confidence in the bitcoin markets and have a bearish effect on the price. It’s likely things will get resolved and 2016 may still be the year of the bull for bitcoin.