Bitcoin (BTC) continued to push a new all time high today after completely recovering from the 30% correction less than a week ago. The market cap now stands at US$131 billion, with US$5 billion in trading volume over the past 24 hours.

Bitcoin Price Analysis 17 Nov 2017 1State of the Network

After a brief mining battle with Bitcoin Cash (BCH) over the weekend, hashrates have stabilized. Largely due to mining profitability increasing for Bitcoin Cash, thanks to its difficulty adjustment algorithm and large price increase, the swift drop in Bitcoin hashrate has recovered. This occurred following a difficulty adjustment for the Bitcoin network, which was unable to adjust difficulty accordingly for the drop, which meant elevated block times.  

Bitcoin Price Analysis 17 Nov 2017 2The previous Bitcoin difficulty adjustment brought a 6% decrease, with the next difficulty adjustment projected for an 8% decrease. Due to inflated difficulty and erratic hashrate, average block times hit 18 minutes, and the mempool, or number of unconfirmed transactions, skyrocketed.

Bitcoin Price Analysis 17 Nov 2017 3The increase in transaction backlog meant that new transactions needed higher and higher fees to be given priority by miners. Fees for non-SegWit transactions reached in excess of US$24. Most of the unconfirmed transactions represent a low or zero fee. The newest release of Bitcoin Core prevents zero fee transactions from being confirmed. However, miners and nodes need to upgrade their clients to the latest version to ignore these transactions.

Bitcoin Price Analysis 17 Nov 2017 4Over the last 24 hours, global trading volume has exceeded US$5billion, being led by the US Dollar (USD) and the Japanese Yen (JPY) on CoinCheck and Bitfinex respectively. Chinese exchange volume remains absent due to regulatory shutdown.

Bitcoin Price Analysis 17 Nov 2017 5Over the past two weeks, OTC volumes have hit newall time highs in: Argentina, Australia, Chile, Colombia, Czech Republic, Dominican Republic, Hong Kong, Iran, Mexico, New Zealand, Norway, Pakistan, Peru, Saudi Arabia, Singapore, South Africa, Sweden, Turkey, Ukraine, United Arab Emirates, and the United States. CEO of New Zealand basedBraveNewCoin, Fran Strajnar, said that “with the growing number of institutional on-ramps, it is no surprise to see the public interest growing exponentially too.”

Bitcoin Price Analysis 17 Nov 2017 6Golix, a Zimbabwe-based cryptocurrency exchange saw a sharp spike in Bitcoin price on the news of a military coup to replace dictator Robert Mugabe. Bitcoin continues to be an answer for citizens in countries of political and economic strife.

Meanwhile, China and Russia are in the process of developing their own state-licensed cryptocurrency. The Canadian government’s attempt in 2012, MintChip, never gained development or support and was sold off to a private company in 2016.

Google trends indicate that searches for the term “Bitcoin” continue to increase, largely matching the price chart, only further signaling organic interest worldwide.

Bitcoin Price Analysis 17 Nov 2017 7Scaling and Fungibility

With high fees and erratic block times, the on-chain versus off-chain scaling debate continues to rage on. Bitcoin Cash offers an effective block size limit of 8MB, as opposed to Bitcoin’s current 4MB. SegWit2x would have increased the effective block size to 8MB. Many opponents to block size increases cite a threat to decentralization, while big block supporters cite high fees and a slow network.

Off-chain scaling opponents remain concerned about a move towards centralized development, led by Blockstream. However, Bitcoin development remains free and open-source, with anyone able to contribute. Only one of the 4 developers with Bitcoin commit access is employed by Blockstream, and most commits over the past year have come from individuals not employed by Blockstream.

It’s important to note that unlike many other cryptocurrencies, who pay their developers directly through a block reward-based treasury, Bitcoin does not. Most if not all of the developers work for a company in the Bitcoin space.

Bitcoin’s most recent scaling solution, SegWit (SW), decreases the size of each transaction in a block when using a SW address, but has been slow to gain support amongst the gatekeepers of the community. Adoption currently stands at 10%. Exchanges and key companies like Coinbase. Blockchain.info, Xapo, BitPay, and Shapeshift have yet to adopt SW addresses. A representative from Bitfinex, one of the largest USD exchanges, said that the exchange would be enabling SegWit addresses next week.

Future scaling solutions for Bitcoin will likely include many other innovations including the Lightning Network (LN), which offers an off-chain bidirectional payment channels. Today the LN development team announced the first cross-chain swap between the Bitcoin and Litecoin enabled test nets.  

Mimblewimble and ZeroLink have also emerged as further privacy and scaling solutions offering complete fungibility between transactions. Other solutions being researched include Schnorr signatures and signature aggregation, Merkelized Abstract Syntax Trees or MAST, and the spoonnet.

Talking Points

The mainstream financial press reported continued institutional hunger for exposure to Bitcoin in a variety of ways this week. Today, Coinbase announced an asset custody program for institutions which meet existing financial regulatory guidelines. CEO of Coinbase, Brian Armstrong, cites that “by some estimates there is $10B of institutional money waiting on the sidelines to invest in digital currency today.”

Coinbase operates in New York State, under the burdensome Bitlicense. Very few companies have entered New York State for Bitcoin on ramping and money transmission. Coinbase holds a license, as do Circle and Ripple.

The Chicago Mercantile Exchange opening a cash-settled Bitcoin Futures product continues to reverberate around news outlets, and is set to begin before the end of the year, with a trial run by the end of  November. The Bitcoin-backed Winklevii COIN ETF remains in limbo after a regulatory denial and revival by the Securities and Exchange Commission.

Jack Dorsey’s Square, a popular mobile credit card processing company, announced a rollout a Bitcoin buy and sell option on its SquareCash app to a select group of users. Should this prove to be successful on SquareCash, other payment processors like PayPal and Venm may follow suit. Jim Cramer of CNBC sees this move as a stride towards legitimacy in the public eye. Dorsey, also a CEO of Twitter, has shown support for the cryptocurrency in the past. The discussion surrounding cryptocurrency on Twitter continues to grow.

LendEDU, a company involved with student loan management, also recently released survey results showing most buyers would not be ready to sell their bitcoin holdings until price exceeded US$196,000.

News also broke that the now defunct Mt. Gox, owned by Mark Karpeles, may be revived under new leadership. Funds lost in Mt. Gox remain in limbo, with Karpeles set to gain much of the post-bankruptcy funds thanks to Japanese bankruptcy law.

On November 30th, The Big Bang Theory will air an entire episode dedicated to Bitcoin. 

Technical Analysis

With a correction and quick recovery, the long standing bull trend continues unabated. Pullbacks are a natural necessary process for trend continuation as profit is taken in overbought conditions.

Currently, the Fibonacci extensions from the most recent high and low projects targets of $8500 and $9300. Fib extensions are especially useful when trying to determine zones of resistance beyond an all time highs.

Bitcoin Price Analysis 17 Nov 2017 8The large bearish reversal patterns, Rising Wedge and Bearish Three Drives, continue to fill, with the march towards US$10,000. Both of these formations can easily be invalidated, but should not be ignored. Should either pattern resolve as expected, a pullback to 50% of the patterns range is expected.

Bitcoin Price Analysis 17 Nov 2017 9Bitcoin Price Analysis 17 Nov 2017 10The low timeframe Rising Wedge which developed during recovery from the correction has essentially been invalidated. However, traders will continue to watch this pattern and any break into the 1.272 fib extension zone, which may represent a short accumulation zone and not a pattern failure.

Despite traditionally being reversal patterns, breaking down when three-quarters complete, Rising Wedges in cryptocurrency often break up first and then reverse. A stop loss just above the 1.272 fib extension on any short accumulating in this zone should hold if the pattern completes to US$6650.

Bitcoin Price Analysis 17 Nov 2017 11On the daily chart, Ichimoku Cloud continues to show bullish metrics after a Kijun bounce. These violent pullbacks are often preceded by a TK disequilibrium, as was the case here. The Kijun bounce, or mean reversion, is always the best option for long re-entry.

Bitcoin Price Analysis 17 Nov 2017 12On the four hour chart, Ichimoku Cloud shows the ferocity of this current bounce. Cloud signals are currently bullish, suggesting no immediate entry. However, this was preceded by a barrage of bullish reversal signs: a Dragonfly Candlestick, an Adam and Eve double bottom, a Bull Pennant, a Kumo Edge to Edge trade, and a Kumo breakout.

Currently, based on distance from the Kijun, price is overbought and will likely retrace towards the Kijun at $6750. There is also a bearish divergence building on the four hour and daily timeframes (not shown).

Bitcoin Price Analysis 17 Nov 2017 13Lastly, the Pitchfork, which uses three anchor points to predict a price channel with diagonal potential reversal zones, also shows an expected bounce from median line (red) support. Price is now again floating in the upper diagonal channel with upper-limit resistance currently stands above US$9000.

Bitcoin Price Analysis 17 Nov 2017 14Conclusion

After years of in-fighting, the scaling and development debate may have paused with a clean break between the two major factions. On or off-chain scaling will remain a heated debate, but Bitcoin is headed toward further off-chain scaling in the very near future. Scaling solutions will be necessary for what may become a stampede of new users, including institutional investors, likely to enter the space in 2018.

Technical indicators suggest the same thing they’ve suggested since 2015, bullish momentum continues. Immediate targets include US$8500 as a potential breakout for another pullback before a further push higher. Based on the buying strength and dip recovery, a price above $10,000 is not unlikely before year’s end.

IMPORTANT: Information provided is for educational purposes only and does not constitute investment advice. Readers should always conduct their own due diligence before making any investment decision.  

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