Bitcoin Price Analysis - Bullish trend on the horizon

Technicals suggest price is currently sitting on support and setting up for a bullish trend reversal in the short term. High timeframes continue to suggest an active bear trend with the potential for an ongoing eight-month Wyckoff accumulation phase. There is a strong possibility of a short squeeze, or short sellers covering their position, if  Bitcoin reaches more than US$7,100.

Bitcoin (BTC) recovered a little over 10% in a recent rally, having established a local bottom on August 13th, but is currently down 68% from the record high in December. The market cap stands at US$109.93 billion, with US$1.65 billion traded in the past 24 hours.

The number of Bitcoin transactions per day has been slowly increasing since April and has averaged between 180,000 and 220,000 since June. This key metric has declined significantly for a number of leading cryptocurrencies throughout the year. Transaction costs have also declined significantly, as has the average transaction value in USD, which can be partially attributed to the decline in the price of bitcoin. Unconfirmed transactions have also declined dramatically this year. There are currently less than 3,000 transactions pending confirmation, most of which were sent with a fee below 4 sats.

Additionally, inflection points in NVT can correlate with extreme highs or lows in price. With the rise of alternative on and off chain methods to send transactions, such as batching and Lightning Networks, the new normal for NVT may take many months to determine.

Since going live on March 15, the LN has continued to gain traction. The channels work much like a tab at a restaurant, which remains open until the client settles the bill. This format allows for numerous transactions to occur without a network fee, until the channel is closed.

Jack Mallers and the Zap team continue to release updates for their LN wallet. On the testnet, Zap has also worked for WooCommerce payments, an eCommerce plugin for WordPress, which accounts for more than 28% of all online stores.

Others see this energy consumption as an opportunity. Peter Van Valkenburg of CoinCenter, a non-profit research and advocacy center focused on the public policy issues facing cryptocurrency in Washington D.C., has argued that instead of destroying the planet, Bitcoin will push the energy market towards more sustainable alternatives, driving an energy revolution.

Bitcoin advocate Andreas Antonopoulos shares this view and has questioned the hidden resource needs required by other payment platforms. This week, the U.S. Senate Committee on Energy and Natural Resources will have a committee hearing on “Energy Efficiency of Blockchain and Similar Technologies” to discuss the matter.

There is also another decision from the U.S. SEC, due on August 23rd, regarding a BTC price following fund. Similar to the announcement for the SolidX/VanEck ETF, this is the final decision and will likely be denied.

BTC exchange traded volume over the past 24 hours has been led by the USDT and the United States Dollar (USD) markets for the twelfth consecutive week, mostly on Binance, OKEx, Huobi, and Bitfinex. In Asia, the Japanese Yen (JPY), Korean Won (KRW), Chinese Yen (CNY) volumes have remained subdued compared to last year.

Technical Analysis

The macro trend remains bearish with short positions continuing to rise despite price near local lows. The strength or weakness of the current trend can be analyzed with the Wyckoff Method, Pitchforks, exponential moving averages (EMAs), Ichimoku Cloud, and chart patterns. Further background information on the technical analysis discussed below can be found here.

BTC price structure has now formed a Wyckoff style low-volume spring, followed by a Sign of Strength (SOS). A break below the previous resistance at US$6,800 is potentially a support test or second spring. Price also sits within a large Falling wedge, making successive lower highs and lower lows. This pattern can represent a bullish reversal pattern, and typically resolves when ¾ full.

On the daily chart, the Cloud metrics are bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and Lagging Span is below Cloud and price. A long entry based on traditional Cloud strategy does not trigger until price breach’s the Cloud. Both the long flat Kijun and long flat Kumo paint strong resistance targets should price move North.

Additionally, price has formed a multi-shouldered inverted Head and Shoulders bullish reversal pattern with a descending volume profile. A break above US$6,550 will likely confirm the pattern, which has a 1.618 fib extension and measured move of US$6,950 and US$7,150 respectively.

Conclusion

Despite continued bearish price momentum, hash rate has continued to increase with mining profitability continuing to decrease. Segwit and continued use of batching suggest the network has gained enormous efficiency over the past six months. Transactions per day have begun rising over the past four months with NVT beginning to decrease, suggesting increasing economic throughput.

Technicals suggest price is currently sitting on support and setting up for a bullish trend reversal in the short term. High timeframes continue to suggest an active bear trend with the potential for an ongoing eight-month Wyckoff accumulation phase. There is a strong possibility of a short squeeze, or short sellers covering their position, if  Bitcoin reaches more than US$7,100.