Bitcoin – What Happens Now?

Wow – what a week! On Friday, Bitcoin zoomed up past the $6000 level, after worrying everybody it was going to slide back down again just as quickly. A look at the weekly chart shows the apparent strength of its current behavior.

Bitcoin Weekly Chart
Bitcoin Weekly Chart

Everything on the chart is pointing upwards. A point of caution though, the price breached and went beyond the $6,000 level but it has yet to close above it. This would seem to indicate $6,000 may have become the new resistance level for the cryptocurrency.

On the face of it, the weekly chart does not bear this out. The strength of the rise is unquestionable. The 21-day EMA is almost 45° and possibly steepening. The 50-day SMA is steadily climbing and both are way below the lowest of the closing prices.

The second point of caution, though, is shown up by the 14-day ADX indicator (shown in lime green in the second window of the chart). This shows the dip downwards over the past two weeks, even though the pulse signal is strongly positive. This could be an early indicator of a weakness coming into play in the price.

At the same time the divergence indicator has given a second signal confirming the upward trend since when, after tailing off slightly, the indicator has gained positive traction upwards, as shown by the magenta tops to the blue indicator signals, all of which are positive.

Bitcoin Daily Chart
Bitcoin Daily Chart

The daily chart reiterates our caution about a further rise. Once again, like the weekly chart, the price has risen above the $6,000 level but has yet to close above it. This would reinforce our argument about the $6,000 line becoming the new resistance level.

Moving down to the pulse indicator, it can be seen as the color of the last few bars has gone from lime green to dark green, whilst at the same time, the 14-day ADX indicator has been negative and looks like it could be below the median if it continues to decay.

A quick look at the wave indicator shows this has leveled out since the last divergence confirmation, after climbing for several weeks at a fairly steady rate – as shown by the magenta topped, blue pulse signals.

From a fundamental perspective, there are some interesting things going on too.

Over the last couple of weeks, we have mentioned Jamie Dimon and his thoughts on bitcoin. It came as a huge surprise this week, then, that JP Morgan, announced it was giving the green light to a blockchain technology, known as Quorum.

In a collaboration with the Australia and New Zealand Banking Group and the Royal Bank of Canada, “JP” is advancing its in-house blockchain solution. They are hoping to embrace this technology to enhance their backroom operations. The three banking groups believe there are vast savings to be made on international money transfers, loan trading, and securities settlement, along with other financial instruments, such as mortgages.

IBM, too, is investigating in blockchain technology for banks. They are concentrating on the lucrative area of cross-border payments. This is a major headache for the banks as they have to settle accounts in different currencies, with different accounting practices, and, in some cases, transfers taking place at a snail’s pace.

Along with Stellar, a blockchain start-up, and Kickex, a payment company, they are hoping to significantly reduce the cost of global payment transactions for consumers and businesses, at the same time reducing the settlement time.

With international transactions sometimes taking weeks to complete, IBM sees a radical transformation in the offing, to obtaining letters of credit, finalizing transaction terms and providing flexibility and transparency, to the banks, as well as their customers.

This confidence in the underlying system of technology which supports cryptocurrencies such as Bitcoin and Ethereum, will make major inroads into it being accepted within wider financial circles, which in turn will increase its acceptance as a viable alternative to “normal” fiat currencies.

In addition, the Bitcoin network will have to manage the Bitcoin Gold Fork tomorrow that can add volatility and new developments into the desire cryptocurrency.

We believe this can only enhance the price of cryptocurrencies in the longer term.

Noble Gold specializes in IRAs and 401(k) rollovers through precious metals and cryptocurrencies investments.

Published by

Collin Plume

Collin Plume has over 15 years of experience in high-level financial services. His expertise and proficiency span commercial property, precious metals, and cryptocurrencies.