Bitcoin 2020: Bitcoin Halving, Soft-Fork, Hash-Rate All-Time-High, and Bakkt Consumer App for Crypto Purchases
Bitcoin (BTC/USD) experienced a dramatic, and impulsive 43% surge from the recent $6 425 ($8 397 CAD) lows, wicking above $9k ($11 762 CAD) and the 200-day simple moving average on the daily chart, but unable as of yet to close above that level on the higher time frames, experiencing a dramatic $727 ($950 CAD) flash crash instead from a high of $9 188 ($12 008 CAD) down to median range support at $8 461 ($11 058 CAD).
There were bearish divergence signals on the Relative Strength Index (RSI), for both the 6-hour and 12-hour charts, leading up to this drop as price printed a higher high while RSI printed a lower high. On the higher time frames, the bias is definitely starting to look increasingly bullish, with this sharp correction potentially being part of a healthy pullback before making another attempt at MA200.
Much of this macro bullish price action has been attributed to the upcoming 4-yearly bitcoin halving in May 2020, when bitcoin mining rewards halve as they do every 4 years, thereby increasing scarcity and value. Historically this event has been perceived to be extremely bullish but it seems that the halving might not be the only catalyst for a bullish 2020.
The bitcoin network hashrate (processing power on the network) has also reached an all-time-high of 126 quintillian hashes per second, a triple increase when comparing to hashrate this time last year. This indicates good network health because mining confidence is rapidly growing, and so there is less concern for miner capitulation leading up until the halving.
Besides the halving, bitcoin is also due to be upgraded in a soft-fork later this year in Q4, in order to improve bitcoin’s privacy and scalability. A soft fork is an upgrade to software protocol where only the previously valid transactions are made invalid. This is exciting news because it is expected to be one of the most innovative additions to bitcoin’s layer one to date.
There are also bullish developments for cryptocurrency consumer payments, with Bakkt, the NYSE-backed crypto subsidiary of the Intercontinental Exchange, planning on launching a new consumer app for cryptocurrency purchases later in 2020. This will enable cryptocurrency holders to make consumer payments using their underlying crypto holdings, and Starbucks is expected to be their first partner for the launch.
Short-Term: Fill the CME Gap with an Elliott Wave Correction Pattern
Over the short-term, bitcoin could potentially be in the process of completing an Elliott Wave corrective pattern from the range high and recent top at $9 188 ($12 008 CAD).
This could potentially be in the form of an ABC correction, where wave A is made up of 5 waves, and is currently in the process of completing wave 5.
Wave 3 was heavily extended with immense selling pressure so there’s a decent chance that wave 5 will extend to a distance of wave 1 x 2.618 with a potential end target of between $8 363 and $8 400 ($10 930 – $10 978 CAD) to complete wave A.
Wave B could potentially complete with a 0.618 Fibonacci retracement of wave A to between $8 847 and $8 922 ($11 562 – $11 660 CAD). There is also an unfilled CME gap between $8 765 and $8 865 ($11 455 – $11 586 CAD) on the CME bitcoin futures chart.
Considering that these lower time frame gaps seem to get filled on a relatively reliable basis, this gives further credence to a retracement back to between $8 800 and $8 900 ($11 501 – $11 631 CAD) over the short term before the start of wave C to the range low between $8 050 and $8 180 ($10 520 – $10 690 CAD). This is calculated using wave equality, where according to Elliott Wave theory, wave C = wave A. This is also a 1.214 – 1.382 Fibonacci extension of wave A.
Long Term: Weekly Chart – Bullish Falling Wedge Breakout and Weekly Bullish Cross
There have been a few bullish developments on the weekly chart, starting with a bullish cross between the 50-week and 100-week simple moving averages (MA50/MA100) in the 4th quarter of 2019, followed by a strong impulsive rise above both moving averages.
Bitcoin then experienced a bullish cross between +DI (bullish trend direction) and -DI (bearish trend direction) on the ADX/DI indicator (trend strength / trend direction), with the result that bitcoin broke impulsively above major resistance of a large falling wedge pattern starting from 2019’s $13 880 ($18 140 CAD) top.
A falling wedge pattern is a bullish reversal pattern that sees price contract as it moves lower. Could the $6 425 ($8 397 CAD) swing low be the local bottom on the weekly chart? The monthly chart can provide further clarity on this.
Monthly – Bottom In or $5K ($6 534 CAD) first? Bullish Cross, Range Median and Schiff Pitchfork Support
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