What a difference a few weeks can make in the Bitcoin investment community. Back on the 3rd of January, an exalted technical indicator was “suggesting Bitcoin is in its longest buying streak in six months.” Digital diehards were rejoicing. Bitcoin prices soon pierced $4,000, a level that had been described as a “titanium resistance level” by one respected analyst in the sector. After a week, Crypto Winter was back with a fury. All bets were off.
The world’s favorite cryptocurrency was in freefall again, it seemed. Shouts of hysteria and bouts of anxiety proliferated the Bitcoin financial press.
When saner heads prevailed, technicians admitted that an “accumulation phase” had just completed, a common condition that occurs when investors decide to load up on a hyped investment that seems due for prosperity ahead. Bloomberg had broadcast far and wide that the GTI Vera Convergence Divergence indicator was signaling a “BUY” in capital letters. Investors obviously responded, possibly driven by “FOMO”, the fear of missing out, a favored term in Crypto-Land parlance.
Now we are told by Bloomberg that this “Holy Grail” of indicators has reversed itself:
Based on the GTI VERA Convergence Divergence Technical Indicator, the largest cryptocurrency just entered a new selling trend today for the first time since mid-November. The last time a sell signal was sent, Bitcoin tumbled about 50 percent from $6,280 a coin to $3,156 over a nearly two-week span.
The first blockchain executive to speak out about this news was Vinny Lingham, a South African Internet entrepreneur who is the co-founder & CEO of Civic, an identity protection and management startup. He made his fortune when First Data bought his last firm, Gyft, for $50 million. He quickly chose to go super negative:
Vinny Lingham
If we break below $3,000 for bitcoin, crypto winter will become crypto nuclear winter. Bitcoin bear markets don’t end when the market indicates that there is a bottom. They typically end when the market indicates that there is no bottom.
Bitcoin did close at $3,420 today.
“Crypto nuclear winter”? Do we have a new phrase in the making? After startling everyone on Twitter with his remark, reporters found a recent interview that may shed light on Lingham’s real concern:
The reality is that crypto needs real adoption and use cases. Until we have that we’re not going to have another bubble. The speculative mania is over. People want real numbers and usage and transaction volumes.
The negative take on recent price action did not stop with Bloomberg’s or Lingham’s remarks. A respected crypto analyst, who has been spot on with predictions in the past (if eight out of eight correct calls constitutes “spot on”), a Murad Mahmudov by name, made his latest forecast public on Twitter – Based on his rather arcane technical analysis tied to a 300-Day Moving Average, he predicted the bottom for Bitcoin to be in the $1,700 to $1,850 range. Gulp!
Mahmadov was quickly chastised for his faith in such an obscure indicator, but compliments came his way, as well. Crypto analysts tend to be infatuated with their prognostications involving technical correlations, but the crypto space is still in its infancy. Technical analysis, to be creditable and reliable in the crypto sector, needs more time to mature. Analysts cannot even agree on an accurate valuation method for crypto assets, let alone pattern recognition with a reliable probability of being correct.
A senior market analyst at eToro calmed the waters a bit with a saner outlook:
There’s no need for overreaction here. Bitcoin is continuing to trade within the core area of support between $3,000 and $3,500, within the broader range of $3,000 – $5,000, where it’s been since November 2018.
At the end of the day, fundamental forces drive price behavior in markets. Technical analysis provides a measure of investor sentiment and psychology, although crudely today with cryptos for reasons already noted. Fundamental prospects remain positive.
Fidelity Investment, ICE with its Bakkt initiative, Samsung, the ErisX exchange – each a positive development on stream for 2019. News today is also that the Nasdaq is working with seven crypto exchanges to share proprietary surveillance expertise. With such good irons in the fire, we may yet see a Bitcoin ETF in the offing, and then the Red Sea will part, as Bitcoin valuations skyrocket again.