Alef Bit Q4 2018 Crypto Market Overview – The Bottom is In?!

In our previous newsletter, Q3 2018 Market Overview, we analyzed the current bear market and our expectations regarding further declines, which arrived as we expected. We also looked specifically at what we termed “Looking for Bitcoin’s bottom:‘Buy The Dip’”. In our review, we gave clues regarding calling the bottom, one of them being a strong capitulation in Bitcoin’s price.

With an additional drop of approximately 50% in Bitcoin’s price since Nov. 2018, could this be the bottom?Let us examine this question more closely by looking at a few possible indicators. Of course, actual trends are subject to all variables affecting the market and no individual indicator can predict actual results.

Bitcoin’s Price Analysis

1) Meme indicator (aka Social Sentiment)

Here is one of the most creative memes from this week:

bitcoin meme index

The last couple of weeks have seen one piece of bad news after another. We have gathered a small collection of the more pain-ful headlines:

All in all, it appears that market sentiment is an all time low. It seems as if people are ready to throw in the towel, which might indicate that the bottom is in.

2) Long Term Trend Analysis

Figures 1 & 2 show the BLX (Bravenewcoin Liquid Index for Bit-coin) on a weekly scale.

As can be seen, in the 2015 bear market, the 200 week moving average (the blue line) acted as a good support level.

The recent drop in Bitcoin’s price brought us within touching distance of the 200 moving average (MA). If the price acts in a similar manner (remember, we are dealing with long time frames), there is a low probability of closing below the 200 week MA.

2015 Bear Market BLX Weekly Chart

Figure 1: 2015 Bear Market BLX Weekly Chart

Figures 2- 2018 BLX Weekly Chart

Figure 2: 2018 BLX Weekly Chart

3) TD Indicator

One of our favorite technical indicators is Tom Demark’s TD sequential indicator.

a) Monthly time frame

In 2015, we bottomed at the 5 month TD count (Figure 3); we are now in TD 5 as well.

Figure 3: BTCUSD Monthly Chart With TD Indicator

Figure 3: BTCUSD Monthly Chart With TD Indicator

b) Weekly time frame, Figure 4

In the weekly time frame (Figure 4), we are already at TD 4; last time, we bottomed at TD 6. However, in 2015, TD 4 was still above the 150 week MA (purple line). Therefore we will have confirmation in the next 2 weeks, but we think it there is a strong likelihood that the bottom is in.

Figure 4: BTCUSD Weekly Chart With TD Indicator

Figure 4: BTCUSD Weekly Chart With TD Indicator

In summary, the TD indicator signals that we are nearing the end of a period of strong downward momentum, with a possible upwards price correction.

4) Bitfinex Shorts Analysis

BTCUSD and especially ETHUSD Shorts on Bitfinex (Figure 5) are at an all-time high.

This is a strong contrarian signal that sellers might be running out of steam. In addition, traders should beware of a short squeeze.

Figure 5: ETHUSD Shorts Contracts on Bitfinex

Figure 5: ETHUSD Shorts Contracts on Bitfinex

5) Local Bitcoin

Local bitcoins tracks the global peer-to-peer trade volumes of Bit-coin transactions.

Figure 6 shows 12 week MA according to the data posted by Coin.dance reports.

As can be seen, recent bottom took place on 20/10/2018 at ~$50M. Since then, the volume has been steadily rising, with volume now stabilizing on approximately $55M.

Figure 6: Local Bitcoin 12 Week MA

Figure 6: Local Bitcoin 12 Week MA

6) Price Prediction

And now to the 21 million bitcoin question – price prediction!

Based on all of the above, our price analysis is as follows -With high probability (>95%), we believe that the market is very close to the bottom:

  • We would estimate that there is a ~47.5% probability that the bottom is in (although we thought we will reach this point during Q1 of 2019)
  • We would estimate that there is a ~47.5% probability that the markets will drop another leg lower, in the next 2 weeks or after a dead cat bounce in Jan/Feb 2019, but we do not expect it be much lower ($2,700 – $2,900 range)
  • We would estimate that there is a low probability (<5%) that there will be a total break of the market later on to $1,000 – $1,500 area for a short time, testing previous resistance-turned-support level.

 

So what’s next?After having called the bottom, it doesn’t necessarily mean we will immediately transition into a bull run. In the next issue, we will address our market outlook for 2019.Any actual investment decision should be based on consultations with your own professional advisors in light of your particular situation. Do your own research.

This communication is provided for informational purposes only and does not constitute, and should not be construed as, financial, legal, investment, tax or any other advice. Alef Bit Technologies Ltd. or its affiliates and/or subsidiaries (collectively, ”Alef Bit”) normally hold as principal bitcoin, Ethereum, blockchain tokens and other cryptocurrencies or asset classes that maybe discussed in this communication.This communication has been prepared based upon information, including market prices, data and other information, from sources believed to be reliable, but Alef Bit does not warrant its completeness or accuracy except with respect to any disclosures relative to Alef Bit and/or its affiliates. Any opinions and estimates constitute our opinion as of the date of this material and are subject to change without notice. Alef Bit may have relied upon certain quantitative and qualitative assumptions when preparing the analyses herein which may not be articulated as part of such analyses. The realization of the assumptions on which such analyses were based is subject to significant uncertainties, variabilities and contingencies and may change materially in response to small changes in the elements that comprise the assumptions, including the interaction of such elements. Furthermore, the assumptions on which the analyses were based may be necessarily arbitrary, may be made as of the date of the analyses, do not necessarily reflect historical experience with respect to blockchain tokens, cryptocurrencies or other asset classes similar to those that may be contained in the analyses, and do not constitute a precise prediction as to future events. Past performance is not indicative of future results.Alef Bit does not assume responsibility for investment decisions. This communication is not intended as investment advice or an offer or solicitation for the purchase or sale of any block-chain token, cryptocurrency, security, financial instrument or other asset class. Alef Bit provides this newsletter for research and discussion purposes only and does not provide general or individually tailored investment advice of any kind. Any opinions and recommendations contained herein do not take into account individual readers’ circumstances, objectives, or needs and are not intended as recommendations of particular cryptocurrencies, other assets or strategies to particular persons. You must make your own independent decisions regarding any cryptocurrencies, blockchain tokens, asset classes, financial instruments or strategies mentioned or related to the information herein. Readers should consult with their own advisors before making any investment or other financial decision. You ultimately must rely upon your own examination and that of your professional advisors, including legal counsel, financial advisors and accountants as to the legal, economic, tax, regulatory, or accounting treatment,suitability, and other aspects of the analyses contained herein. Alef Bit shall not be liable for either (i) any errors or omissions made in the data or analyses contained herein or (ii) damages(incidental, consequential or otherwise) which may arise from your or any other party’s use of the data or analyses contained herein.This communication may not be redistributed or re-transmitted, in whole or in part, or in any form or manner, without the express written consent of Alef Bit. Any unauthorized use or disclosure is prohibited. Receipt and review of this information constitutes your agreement not to redistribute or re-transmit the contents and information contained in this communication without first obtaining express permission from an authorized officer of Alef Bit.

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