Bitcoin Price Analysis January 4, 2017, Technical Analysis

Bitcoin has been volatile during the trading session on Wednesday, as we continue to bounce around in consolidation between the $13,000 level on the bottom, and the $16,000 level on the top. I believe that the market is trying to build up enough momentum to go higher, but it’s not until we clear the $16,000 level that I think you can throw a lot of money into the fray. I think that a break above the $16,000 level probably opens the door to the $18,000 level after that, but it will take a significant amount of momentum to break above there. Once we do, then I think you can get a bit more aggressive about your trading position. However, in the meantime I think that volumes are still very thin, something that’s been very interesting to witness as the futures markets opened. Quite frankly, the volume hasn’t returned since then, and when we do see volume, it’s typically in a negative move.

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I believe that although Bitcoin may rally from here, there is serious structural damage that has been done. Because of this, if we were to break down below the $12,000 level, I would become aggressively short and aim for the $10,000 level, followed shortly by the $8000 level which is the 50% Fibonacci retracement level of the larger move. Ultimately, that could be what happens, but I also recognize that this market has been a rational more than once, so a parabolic move to the upside is most certainly within the realm of possibility. It is because of that possibility that I look at a break of the $16,000 level as a massive signal to start buying. Buying on the dips can also work, but you will have to be very cautious along the way, as large positions will be subject to nauseating swings and profit and loss. I believe that eventually, we will get a clearing out of the “dumb money”, but we are not quite ready to have that happen yet.

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