A Future Collapse in Bitcoin's Network, Plus $1175 in The Cards!
Hi friends! Welcome to this update analysis on Bitcoin! Let's get right to it. Looking at the daily chart, you can see that BTC has recently broken down from the big bear flag that we were covering. If you recall from my last analysis, I gave a compelling argument for why I believe that BTC could be in the process of moving down to the $1175 area, to test the high made in late 2013. If you would like to review that analysis, it is linked below.
Interestingly, the bear flag that we just broke down from, corresponds nicely with the analysis that I gave, calling for the $1175 area. If we use the current bear flag to generate a price target, you can see that it ends up almost exactly at $1175. So, in addition to having a strong argument from the log chart, for why $1175 is in the cards, we now have a bear flag breakdown, with a price projection that puts us around $1175 as well. When multiple technical indicators on a chart, point toward a similar price target, it increases the technical likelihood that the target will actually be reached. In essence, this is due to the fractal nature of market price action.
Now, that isn't to say that we won't see a bounce off of $3000. I am pretty confident that BTC will find some sort of support around $3000, because it is a level that a lot of people are talking about. The only thing is, they're about eight months behind Poop. haha =D Anyway, it's likely that a lot of buy orders are waiting around $3000, so it's likely that we could see a bounce there, before price ultimately continues it's decline toward $1175.
Many people have been asking me if I think we will see new all time highs after $1175. I think if we see a proper floor form there, that would be very similar to the floor that was produced after the high was made in late 2013. Therefore, if a proper floor is defined around $1175-$1100, I think in a few years, BTC could generate new all time highs. HOWEVER, I will never trade that assumption, until the market proves it to me, by actually forming a floor at those levels.
From a fundamental standpoint, my Twitter followers and I have been having an ongoing discussion about mining costs, verses mining profitability, verses a collapse of the BTC network. Mining costs in the US are estimated to be around $4500-$5000. We are well below that right now, which is why miners have been shutting down at a record pace. Difficulty will continue to adjust, but I think that the adjustments lag the market price, and are not as proactive as people think. Also, BTC transaction numbers are horrible, which makes it very unlikely that transaction fees will support miners in this downturn. Therefore, if price continues to collapse, I believe that the security of the blockchain could be at risk, due to rapidly declining miner activity, which could ultimately cause a collapse in the network.
Unfortunately, it is impossible to know the historical average cost of mining, verses the price of BTC, since mining costs and concentrations vary from place to place. I think the best technical indication, is the hash rate chart. Interestingly, the hash rate just saw it's second worst decline in history, indicating that miners are leaving at an increasing pace. Furthermore, the hash rate chart itself, looks like a classic bubble meltdown, which seems to indicate that there is much more downside risk to the hash rate. In other words, a far greater loss in mining activity. If that happens, the BTC network cannot sustain itself. Sure, the hash rate collapsed before, but the network wasn't as big as it is now. It is different, and unlikely to sustain itself, in a catastrophic loss in mining activity. For the record, I'm not saying that a collapse in the Bitcoin network is imminent. I'm just highlighting the red flags, and noting the very real possibility.
A better question would be: "why would mining activity continue to collapse?" I would say, because price continues to fall faster than the hash rate is adjusted, preventing mining incentives from being realized by potential miners.
Anyway, those are the technical and fundamental red flags that I see. For educational purposes, do with it what you must.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Interestingly, the bear flag that we just broke down from, corresponds nicely with the analysis that I gave, calling for the $1175 area. If we use the current bear flag to generate a price target, you can see that it ends up almost exactly at $1175. So, in addition to having a strong argument from the log chart, for why $1175 is in the cards, we now have a bear flag breakdown, with a price projection that puts us around $1175 as well. When multiple technical indicators on a chart, point toward a similar price target, it increases the technical likelihood that the target will actually be reached. In essence, this is due to the fractal nature of market price action.
Now, that isn't to say that we won't see a bounce off of $3000. I am pretty confident that BTC will find some sort of support around $3000, because it is a level that a lot of people are talking about. The only thing is, they're about eight months behind Poop. haha =D Anyway, it's likely that a lot of buy orders are waiting around $3000, so it's likely that we could see a bounce there, before price ultimately continues it's decline toward $1175.
Many people have been asking me if I think we will see new all time highs after $1175. I think if we see a proper floor form there, that would be very similar to the floor that was produced after the high was made in late 2013. Therefore, if a proper floor is defined around $1175-$1100, I think in a few years, BTC could generate new all time highs. HOWEVER, I will never trade that assumption, until the market proves it to me, by actually forming a floor at those levels.
From a fundamental standpoint, my Twitter followers and I have been having an ongoing discussion about mining costs, verses mining profitability, verses a collapse of the BTC network. Mining costs in the US are estimated to be around $4500-$5000. We are well below that right now, which is why miners have been shutting down at a record pace. Difficulty will continue to adjust, but I think that the adjustments lag the market price, and are not as proactive as people think. Also, BTC transaction numbers are horrible, which makes it very unlikely that transaction fees will support miners in this downturn. Therefore, if price continues to collapse, I believe that the security of the blockchain could be at risk, due to rapidly declining miner activity, which could ultimately cause a collapse in the network.
Unfortunately, it is impossible to know the historical average cost of mining, verses the price of BTC, since mining costs and concentrations vary from place to place. I think the best technical indication, is the hash rate chart. Interestingly, the hash rate just saw it's second worst decline in history, indicating that miners are leaving at an increasing pace. Furthermore, the hash rate chart itself, looks like a classic bubble meltdown, which seems to indicate that there is much more downside risk to the hash rate. In other words, a far greater loss in mining activity. If that happens, the BTC network cannot sustain itself. Sure, the hash rate collapsed before, but the network wasn't as big as it is now. It is different, and unlikely to sustain itself, in a catastrophic loss in mining activity. For the record, I'm not saying that a collapse in the Bitcoin network is imminent. I'm just highlighting the red flags, and noting the very real possibility.
A better question would be: "why would mining activity continue to collapse?" I would say, because price continues to fall faster than the hash rate is adjusted, preventing mining incentives from being realized by potential miners.
Anyway, those are the technical and fundamental red flags that I see. For educational purposes, do with it what you must.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Comment:
The previous analysis...
Comment:
Despite the fact that we're falling, there appears to be more buy-side volume than sell-side. This could be an early indicator of a relief rally soon. However, a relief rally is unlikely to change the general direction of this market.
Comment:
Update analysis...
