David versus Goliath: The Bitcoin vs USD by ARB Oteju

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The advent of blockchain technology has been disruptive, to say the least. Bitcoin (BTC) the premier cryptocurrency that came into existence in 2011 has experienced a meteoric rise in value since its launch.

 

It has slowly become a safe haven store of value on the same shelf as other instruments such as gold (XAU), silver (XAG) and Treasury Bills. The things about instruments such as these are that no one wants to actually spend them hence the scarcity and resultant price.

 

Bitcoin and a few of the hundreds of other Cryptocurrencies that have emerged are now being accepted by large merchants across the world, a good fundamental sign even though not many people exchange it for actual goods and services. A large

On the 18th of December 2017 Bitcoin (BTCUSD) reached an all-time high of $19,500. It began to shed value from the 19th of December till the 5th of February.

 

There was then a price rally from $5900 to $10,000 spanning the 6th of February to the 16th. The entirety of all this price action to present-day has formed a precariously perched financial instrument that is currently extremely bullish with clear support areas but with strong resistance areas close overhead at $11,900 and $16,800.

 

My technical analysis focuses on repetitive market cycles and patterns which shows the precise support and resistance areas on the trail that morphed through the phases of disbelief, hope, optimism, belief, thrill, euphoria, complacency, anxiety, denial, panic, capitulation, anger, depression and finally disbelief in the current resurgence by the weak holders.

 

The entirety of this cycle is evident in the form of patterns and failed patterns that price formed over the lifetime of this financial instrument. The current strength of BTC against the US dollar after the multi-month decline is the focus of the mark-ups in the charts below.

(BTC) 1H Chart (Green line represents entry)

In the chart above I entered into a buy trade on BTCUSD on the 7th of February as seen from the 1-hour chart (zoomed out). The basis for the emergence of bullish support on the 5-minute chart (shown in the chart below).

 

This bullish price pattern directly challenged prevailing downward momentum which had built steam since from all-time highs in December, forming a very formidable bearish descending pattern that can only be neutralized when/if the price gets to $11,900. I bought BTC at the support area of the price structure that could push BTC not just to $11,900 but to $12,000, $20,000 and onward for a very good risk-reward ratio trade.

 

(BTC) 5M Chart (Before)

(BTC) 5M Chart (After/As-is)

Say hello to David, the little pattern that emerged on the 5-minute chart. What Davis has going for him is that he is in the direction of the truly prevailing underlying bull trend and he has come at the tip of a decline spear-headed by Goliath in form of the price pattern in the 1-hour chart (as seen in the chart below).

 

We expect David, to ‘vanquish’ Goliath by pushing prices to $12,000, then on to $17,000 and so on and so forth. I have invested my pre-engineered risk amount into this position and my sentiment bullish UNLESS price drops and breaches the base of the second (higher) green rectangle at $7,100.

(BTC) 1 H Chart (After/As-is)

Alternative scenarios are explained below:

(BTCUSD) 1 H Chart (Paths)

The chart above shows some of the possible scenarios that could emerge at the price of BTC. The most important scenario to me as an investor right now is the ascension from $6,500 (David), currently at $10,000 which must reach $12,000(Target A) before $7100 (Base 01) for my sentiment to remain aggressively bullish with a likely rapid rise back to $20,000.

 

On the BEARISH side of the tracks, a retracement to what we have termed Base 01 before reaching Target A would trigger a decline to $2500 or lower.

 

In the coming weeks as governments ban and unban cryptocurrency exchange trading in different parts of the world, as the equity markets either continue to meltdown or climb, as the almighty US dollar continues to decline against the majors and the twists and turns in an evolving world economy reveal themselves, the fate of Bitcoin prices will be etched clearly in the price action.

 

For now, David is in the driver’s seat. It may also be cogent to mention that due to the fact that the general trend of BTC is up, the downward pattern is actually the underdog no matter how overbought the markets may seem.

In my next article I track the progress of the aforementioned trade and I also analyse the other coins in my portfolio.

 

Trading involves the risk of loss. Insights and analysis explained here should not be taken as investment advice. All investment decisions taken by readers should be duly supported by their own research.

 

 

Adeife Oteju is a technical trader, entrepreneur and writer based in Lagos, Nigeria. You may find more of his work at [email protected] and subscribe to my newsletter for trade updates and stories HERE

 

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