Bitcoin’s Civil War is not yet over.
These past 2 weeks, the price of Bitcoin was in limbo, trapped between breaking higher or breaking down to lower levels. An impending blockchain hardfork on August 1 is perhaps responsible for the tension that could send prices lower. But there is also the overarching bullish trend from late 2016 that is set to continue once these troubles are laid to rest. Bitcoin is in a tough spot. There is a deadline on August 1st when a BCC chain is due to fork off and another deadline on August 23 when SegWit is supposed to officially activate. Of course, knowing Bitcoin, anything could happen between now and then.
Since the last price analysis, bitcoin recovered back to $2940 within 6 days in 3 swings. The price resurgence came close to the all time high at $2940, but failed, and switched to a consolidation. This sideways pattern lasted 4 days, coiling within a triangle pattern that typically precedes a break out.
After the sharp 3 wave rise to $2940, traders were bullish on an upward breakout. The strong up trend was attributed to a successful lock in of BIP 91; a compromise that will see a scaling proposal including both Segregated Witness and a 2MB hard fork. The market translated this as bullish.
But the long awaited triangle took an unexpected turn, and broke down to a low $2400. Price found a support at the 50% fibonacci retracement level of the whole move from $1830 to $2938. The 2 hour chart above shows 5 blue dots counting 5 waves from the bottom. The green dots count a large 5 wave count in force.
As at writing this, price has surged to $2740, after finding a bottom at $2400, and forming a 5 wave pattern from this floor on the hourly chart. Within the larger 3 wave pattern from $1830 bottom, this would be the 5th wave after a 4th wave correction from $2940 top.
So price is heading higher to at least $2900. As long as the trend is intact, then I expect to see 5 wave structures form within 5 wave structures. This is the hallmark of an elliott wave motive trend.
However, only a break of $3000 will confirm that the resurgence from $1830 is wave 5, the last wave of the trend from 2016. The chart above is the count I have been watching, anticipating a 4th wave corrective bottom before another leg up for wave 5. This chart was before the bottom at $1800. As seen here, even lower degree wave 4 fractals too are followed by wave 5s.
It is a pattern that most Elliott Wave chartists seem to be watching, including Goldman Sachs. Goldman’s Chief Technician Sheba Jafari, shared a similar wave 4 forecast chart in a report. ZeroHedge reported her saying
“Bitcoin is still within the limits of a well-defined range, it may need another few swing within the range before resuming its underlying trend. Some potential volatility that could send it as low as $1,786 but not much further from there. A minimum target at 2,988 and scope to reach 3,691”
“Anything above 3,000 (Jun. 13th high) will suggest potential to have already started wave V, which again has a minimum target at 2,988 and scope to reach 3,691 (the latter being a preferred target as this assumes a new high). At this point, it seems reasonable to assume that the market is in a corrective process until there’s been real evidence of an impulsive advance.”
Bitcoin’s civil war is far from over
Bitcoin’s scaling debate seems to have caught the attention of mainstream media outlets. This week the Economists, published an article on Bitcoin’s ongoing Civil War, in reference to the blocksize debate. In Has the bitcoin civil war come to a peaceful end? , the threat of a hardfork is narrowly avoided, as the 2 major warring factions – SegWit and pro big blockers, have compromised on SegWit2x.
But this is far from the truth, as a new Bitcoin proposal, Bitcoin Cash, has settled on August 1st at 12:20 p.m. UTC as the deadline for a hard fork. BCC, while derived from Bitcoin Core, scraps some features such as Segregated Witness, and Replace By fee (RBF) and, bumps the block size to 8MB.
Bitcoin Cash introduces a twist to the debate that has lasted 2 years. It also introduces a contingency plam for big blockers, in the event that Bitcoin Core reneges on the 2X block size packaged as part of the SegWit2X compromise. In this roadmap, a 2MB hardfork is set for November. Skeptics are wary of Bitcoin Core, which previously failed to honor a block size bump agreement made at a Hong Kong meeting with miners in 2016.
Bitcoin Exchange ViaBTC begins trading Bitcoin Cash ‘BCC’ Token
After announcing mining support for the Bitcoin Cash chain split, ViaBTC launched futures trading for BCC tokens on July 22. The tokens are tradeable against both Bitcoin (BTC) and Chinese Yuan (CNY), but, will only be redeemable after the August 1st split.
Surprisingly, BCC traded as high as $888 on its first day, before dropping to $284 soon after. As at writing this, BCC is trading at $420 and can be tracked here
This week, other exchanges such as Okcoin and Huobi announced they will allow users to trade the coin split, while Coinbase and Bitstamp have expressed no support. Some of the notable altcoin exchanges like Poloniex and Bittrex are still on the fence.
The survival of a minority backed chain, like BCC, seems a stretch at this point. But, miners have the option of switching at any moment. As long as this chain stays alive, then speculators will trade it.
Russian Linked with Mt. Gox Bitcoin Arrested in Greece
38 year old Russian Alexander Vinnik was arrested in Greece after a US warrant was put out for his arrest on money laundering charges to the tune of $ 4 billion. Alexander, who was part of the team running Romanian exchange Btc-e, used the company’s resource to launder proceeds from the Mt. Gox, Bitcoinica and BitFloor exchange hacks.
According to a Mt. Gox infosec report, he was a Chief suspect in the Mt. Gox theft of 630,000 BTC between 2011 and 2013. This independent report corroborates comments by US authorities linking him to the failure of the Japanese based exchanged that went under.
“Vinnik “obtained” funds from the hack of Mt. Gox and laundered them through BTC-e and Tradehill, another San Francisco-based exchange he owned, they said in the statement.”
Mark Karpeles, Ex-CEO of collapsed exchange Mt. Gox, was happy to tweet the news of the arrest and commended an unknown team that had led to the capture of Vinnik. The team was responsible for the infosec report.
Bitcoin Weekly Price Forecast
It is worth watching out for a break above $3000 for a solid confirmation of a wave 5. It is possible the current rise to $2740 is the wave that breaks out for the wave 5. If it fails to break its peak at $2940, then a shallow retracement might occur to further extend this wave 4 consolidation.
In all cases however, higher prices are in order once this corrective wave resolves itself.