As expected, the events leading up to the BTC hardfork were dramatic. Before splitting off with its hardfork counterpart (Bitcoin Cash), BTC-USD saw drastic swings in price with wildly different market values, depending on the exchange. While some exchanges saw new all-time highs being achieved (Kraken BTC-USD), others began to see discounts in their BTC-USD values. At points, there were even $100+ premiums between Kraken and Bitfinex.
At time of this article, Bitcoin Cash (BCH) markets on most major exchanges have existed in a bubble as BCH deposits and withdrawals have been halted. There are many theories regarding the isolation of exchanges and their corresponding BCH-USD markets’ effects on the BTC-USD markets. Given this bit of information, one can assume that the dramatic rise in BCH market cap is unreliable at the moment. There is a large portion of the Bitcoin community that is unable to sell its forked BCH and is currently sidelined. As such, this analysis will only take a look at BTC-USD price trend and what we can expect there.
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Looking at the macro trend of the BTC-USD market, we can see that a previous test of the 23% Fibonacci Retracement values was strongly tested and subsequently rejected in the days leading up to the hardfork:
Figure 1: BTC-USD, 12HR Candles, Bitfinex, Macro Fibonacci Retracement Lines
The $2500 values have proven to be a formidable foe for those looking to the short the market, and last week was no exception. To date, $2500 values have built a strong level of support over the past couple months and will continue to be a strongly contested price range.
The activity following the hardfork was completely expected by many. Without going into too much detail, the hardfork of BTC-USD can be thought of as a fracturing of its market cap — essentially, an instant reduction of BTC-USD value:
Figure 2: BTC-USD, 15Min Candles, Bitfinex, Price Drop Post-hardfork
At the moment, since BCH-USD has yet to be opened to those without coins on the major exchanges, the actual effects of the hardfork have yet to be felt (as mentioned before, the bulk of the BCH holders are currently sidelined without major outlets to sell their coins). The current prices are reflective of speculators anticipating a drop in value upon the opening of the BCH deposits and withdrawals. To date, the price activity has followed the Fibonacci Retracement values very closely. Multiple tests of the 50% retracement values were attempted before ultimately dropping down to the lower values. At the time of this article, the BTC-USD markets are attempting to test the 23% Fibonacci Retracement values.
Given the fact that BCH has yet to really sink its fingers into the BTC-USD markets, one would expect to see a test of new lows within this current bear run. With each test of the Fibonacci lines there is a swell in volume. A test of the lower boundaries of the bear run will be no exception.
It’s never easy to confidently write price projections with so much uncertainty in the markets. In an attempt to remain objective in my writing, I will just say this: Volatility is to be expected as BCH and BTC attempt to set their place in the market.
In general, when looking for reliable trends, it is almost always advisable to watch the volume trend as it correlates to price movement. When the price is erratic and appears to operating irrationally, check the volume. If there is no volume to substantiate a move, more often than not the move will be short lived. Volume establishes support and it reaffirms resistance lines. Volume also is a great indicator of market momentum and direction. When trading BTC in the coming days, volume will be your best friend.
Summary:
- BTC-USD showed strong support at the $2500 values in the days leading up to the hardfork.
- To date, the effects of the hardfork have yet to be realized because BCH deposits and withdrawals from most major exchanges haven’t be enabled.
- Once BCH deposits are enabled, expect high volatility on the BTC-USD markets as both coins (BTC and BCH) compete for their market cap share.
Trading and investing in digital assets like bitcoin, bitcoin cash and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.