Bitcoin Market Analysis: December 15-21

This week the breakout news was Microsoft and its affects were certainly short lived. Just like PayPal we have a situations where the news sounds good and creates a nice bump, but the near term implications are not very lasting nor critical. We need more companies that are willing to actually embrace Bitcoin and not just as a payment system. Once again this will only lead to additional selling pressure if people do decide to send their bitcoins to Microsoft.

Russia definitely made headlines this past week in two ways. They look serious about penalties to Bitcoin users and that clearly has not had much of an affect as local bitcoins is showing interest is higher than ever. In other news, Russia is announcing an amnesty for all financial capital returning home in a no questions asked policy. That is a great economic chess move if true and if more countries actually did that there might not be a real need for something like Bitcoin. Bitcoin’s greatest advantage is economic freedom and 99% of the world has no idea that economic freedom is what will turn the world around after the next financial crisis, which is definitely coming this decade. It should be the biggest one in our lifetime and Bitcoin will play a major role.

For the time being however, when everyone is happy with the current system there is nothing forcing them to go out and learn something new so it is definitely looking like the year end rally is not in the cards and the first half of 2015 will also be a struggle for this revolutionary technology.

The Month Ahead

Last week we were expecting more downside, and even though the Microsoft move caught us by surprise, we are right back to where we were though in a slightly weaker position. The 50-day SMA has turned down is now sitting at $370. The price has been rebounding into that zone the last few days and we will give it some leeway to get there. At any time however, the odds favor more downside and there is a high probability we will be looking at the $290 descending triangle target once we get below $340. There is also plenty of room for the RSI to reach oversold levels. 

The Week Ahead

The short term view has leveled out since the news a few days ago, and ideally would be nice to see it touch the 200 period SMA and have the RSI hit overbought before resuming the downward move indicated by the daily chart. Look for the moving average cross before considering any thoughts of higher prices in the near future. The chart clearly shows a breakdown that was imminent if not for the Microsoft news. We were just a few dollars away from going under the monthly low and going below the critical $340 support. We might not be so lucky next time.

Conclusion 

Once again our upside is very limited, there might still be a little bounce in this move left to match the highs of the Microsoft news announcement but the odds in the charts favor more downside. Watch the $340 zone very carefully, any new lows this month is an indication of a potential breakdown. We would need much better news than Microsoft next time to break out of this trend.

Reference Point: Monday Dec 15 7:30 am ET, HitBTC Price $350

About the author

Tone Vays is a 10 year veteran of Wall Street working for the likes of JP Morgan Chase and Bear Sterns within their Asset Management divisions. Trading experience includes Equities, Options, Futures and more recently Crypto-Currencies. He is a Bitcoin believer who frequently helps run the live exchange (Satoshi Square) at the NYC Bitcoin Center and more recently started speaking at Bitcoin Conferences worldwide. He also runs his own personal blog called LibertyLifeTrail.