Note from the Author: Follow me (@Tone_LLT) for more timely updates throughout the week on price developments, latest charts and overall Bitcoin news commentary.

Last Week’s Review

Last Week we concluded with the following:

Because the US$200-210 range held the price, we have to maintain our bullish view for a short while longer though the longer we stay at the bottom of this zone the more likely it is to drop out from under us. US$223 remains critical, so the number one suggestion for the time being is to do nothing in the US$215 to US$230 range. If we start to go down into the low teens again, there is a very small probability that US$$210 will hold the price for the 3rd time and lower prices will probably come about. On the other hand if we break above US$230 and actually stay there for more than a few minutes, we might still reach our targets at US$250 and above.

Two scenarios in order of higher probabilities

Bullish: We remain slightly bullish but would need to see a close over US$230. Resistance continues to mount so if we do start to go up, US$254 and the 50-day SMA is what will probably put a stop to things. If we make it past that, then it’s back to the recent highs of US$315 and probably more.

Bearish: The bear rears it’s ugly head once the recent lows are taken out. Only if the price drops under US$210 will we consider the possibility of making new yearly lows. At this point there is really not much support so if we go under $US200, going down to as low as US$100 becomes a reasonable target. (This part was left virtually the same as last week)

Being patiently bullish the last 3 weeks certainly paid off even if some sweat and tears were starting to show. Not only was the move from US$230 to US$250+ was forecasted right on the money, but also the fact that once we got there, resistance was going to “put a stop to things”. As usual, however, in the Bitcoin world you always underestimate how high things will go and also how low they pull back after. This analyst was expecting US$255 to be the high and then a fall to US$240 for the pull back. At the moment it’s pretty clear the high was US$268 on Bitfinex while the low then after has already dropped under US$230 in light of the Bter news to be mentioned in more detail later on.

For now we start as usual by looking at the big weekly picture.

The long-term view has been on the stable side the last few weeks and it’s slowly starting to pick up a little upwards trend, which is good. We remain just under the green trend line, and that’s ok for now, however, it’s starting to rise pretty quickly so Bitcoin is going to need a monstrously positive week in the near future.

Fundamentals & News

As usual we present 3 good roundups for those too busy to keep up with it all:

Today we have to start with the latest in hacks, scams and chaos news of the Bter exchange out of Asia. Clearly the NXT incident form a little while back and some evidence of them orchestrating a pump and dump was not enough for people to realize that perhaps they should be mindful of where they store their bitcoins within this unregulated space. In addition to Bter, there is chatter on Reddit that HitBTC and some other exchange this analyst never heard of might have also been compromised.

What can we say about all these hacks and scams in general not to mention the recent fiat banks breach for over US$300 Million. (Though in the case of Fiat, they can hit Ctrl+P “and it’s back!”) One way to look at it is to really think about the worlds of William Sutton (aka Slick Willie), a famous American bank rubber who escaped prison 3 times and has been credited with the following saying when asked why he robbed all those banks: “because that’s where the money is.”

The fact is that the reason why all these exchanges are being compromised is that unlike most economists and government bureaucrats, criminals actually understand how valuable and unique bitcoin really is. It was nice to see someone give back those NXT coins, but good luck getting the bitcoins back.

“Incompetent or fraudulent exchanges need to go away, and the sooner the better, no bailouts or forced regulation needed.”

                        - Tone Vays

There was some very important news out of EU this week. The unreasonable value added tax proposal is both a blessing and a curse. On the one hand it will significantly slow Bitcoin adoption in the EU, which some might consider bad. On the other hand it will encourage Bitcoin use in the black markets for tax evasion, which free market capitalists like myself would consider good.

The EU is continuously showing its true colors of a centrally controlled state and with a continued plan to tax and fine the private sector to oblivion; they are simply signing the union’s death certificate one country at a time.  France started the show with its 80% tax rate on the rich, which caused some high profile people to move to countries like Russia. Then let’s not forget the insane sanctions against Russia to the determent of its economy, but it looks like they are starting to come to their senses on that one.

The first nail in this coffin will come as Greece defaults on all its debts (5 years too late in my opinion as it has exponentially grown since the initial problems in 2010) and takes many European banks down into the abyss with them. Let’s hope this plays out sooner than later because Bitcoin can sure use some good news and there is nothing better for this new global wealth savior then some small country like Greece having its entire financial system down for a week.

On the lighter side of things, BitQuick does not have a chance against LocalBitcoins. Contrary to popular belief, LocalBitcoins is not used ONLY by criminals. A large portion of that community just wants to live life without the government tracking their every step. But let’s give the CEO of BitQuick the benefit of the doubt when he says, "[personal data] will never be sold or disclosed to third parties, unless required by law enforcement." So if law enforcement ‘requires’ a continuous real time feed of all transactions and user data, will there be even be the slightest push back from your company?

“Once people realize the power of holding your own private key, that is all the eco-system will need, it’s the ultimate Bitcoin Killer App.”

- Tone Vays

Education (Update On Possible Trend Change)

Just as a reminder we are still looking at an overall trend change but the path is not easy. Going back to the general idea shown in previous articles we are still considering the US$166 low to be it for the year (this can certainly change).

We have labeled our point 1 to be the breakout over US$250 in January and a potential point 2 to be the US$210 low in early February. Based on that view we are still sitting between points 2 and 3. Here is the chart once again.

So what do we think about a possibility of a long-term trend change, is it still possible? Absolutely, but it’s far from certain. We will watch this carefully one step at a time. Many traders are now tweeting that on certain longer-term charts we have not yet broken out of the large downward trend-line (blue line on the chart above). And this week as wee hit a high of US$268 we once again hit that resistance point. Trading really is more of an art than a science but those that do it Technically happen to use the same set of tools just in different ways.

As a quick reminder, this series is not meant to be a trading program to follow. It’s meant more for educational purposes and every trader is encouraged to figure out what works for them and perhaps use some of the charts here to notice something they might have missed.

For some of those new to trading, please go back and read all the educational section since the summer and try to use your own signals in your trading with things that work for you. You can find most of the recent articles in my CT profile or links to everything I’ve written on my personal blog: www.libertylifetrail.com/publications/

Daily Overview

Here is the usual one-year look back using daily candles.

We are still inside the very steep bullish channel but once again sit at the very bottom of it. No need to remind the readers what happened the last time a similar channel was broken to the downside (that channel however, was more defined at the end of last year). Until support gives way assume we are still on that bullish path.

Also keep in mind that if we were to draw this channel using daily close prices instead of daily highs, it would not be nearly as steep and we’d have a little more leeway to price movements. We need to get back above US$255 and stay there for a chance to reach the next major target of US$340 or even the top of the channel above US$400.

The zoomed in version of the daily chart has been our bread and butter, with every Triangle pattern hitting its targets within a week (except the one in mid November which took a month). Those that say Technical analysis does not work, just point them to this chart. Last week it was saying that the symmetric triangle should break out and since this analysis was leaning that it would break to the upside, the target was US$270 and for all realistic purposes, it was reached when price hit US$268. (This by the way was tweeted out the day before the breakout and also published on trading view).

So what is it telling us now? Well at the moment it’s actually not telling us anything useful. It would have been nice to see consolidation above the 50-day SMA (Blue Line), but probably due to overreaction of incompetent/fraudulent exchanges, we are consolidating just above the warning zone of US$230. Feel free to treat any consolidation in the US$210-230 as the warning zone, and if we dip under US$210 for more than a few hours, that is a serious danger zone.

For a quick comment on the hourly chart that gets highlighted on Twitter (@Tone_LLT) watch the Fibonacci retracement lines very carefully. It was the 38% at US$260 that indicated this move up was getting ready to take a break (along with the 50-day SMA on the daily) and now we are trying to get back over the 50% retracement line at US$240.  Getting above this line for an hour or two is a great start.

Conclusion

The move out of the Symmetric triangle was pretty strong, and the panic selling there after might have been due to the bad news of a few exchanges having major issues. The expectation going forward is still pretty bullish and once we can spend a significant amount of time above US$240, there is a very good chance we will see new highs for the month and give the yearly high of US$315 a run for the money.

Two additional scenarios in order of higher probabilities…

Bearish: Since the primary case is pretty bullish, here is what to watch out for. Our first real support is the dreaded US$223 Fibonacci line, which we do not want to see breached (hourly charts). Under it is the monthly low at US$210. If we were to drop below that, all that’s left is US$200 as a psychological round number and that’s it. Panic can set in and it’s clear sailing down to US$100, which no one wants to see. Not even those who might profit from shorting bitcoins, because in the end you just end up with more bBitcoins, which may or may not be worth anything if the price keeps going down.

Bullish: The continuation of the bullish case looks like this. First hurdle is getting back above US$240 and staying there, then tacking another shot at US$260 and US$315, which we are expecting to happen in the next few weeks at the moment. After that look for resistance at US$340 and US$400

Reference Point:  Monday Feb 16 12:00 pm ET, Bitfinex Price US$235

About the author

Tone Vays is a 10 year veteran of Wall Street working for the likes of JP Morgan Chase and Bear Sterns within their Asset Management divisions. Trading experience includes Equities, Options, Futures and more recently Crypto-Currencies. He is a Bitcoin believer who frequently helps run the live exchange (Satoshi Square) at the NYC Bitcoin Center and more recently started speaking at Bitcoin Conferences world wide. He also runs his own personal blog called LibertyLifeTrail.

Disclaimer: Articles regarding the potential movement in crypto-currency prices are not to be treated as trading advice. Neither Cointelegraph nor the Author assumes responsibility for any trade losses as the final decision on trade execution lies with the reader. Always remember that only those in possession of the private keys are in control of the money.