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article imageBitcoin recovers to well over $3,500 briefly

By Ken Hanly     Dec 17, 2018 in Technology
Bitcoin together with many other cryptocurrencies is in the green today. Bitcoin was able to break the $3,500 level and remains still close to that late today.
CoinDesk analysis
Omkar Godbole writes his usual daily analysis of Bitcoin's (BTC) price movements last update at 11:59 UTC on December 17. Godbole points out that a year ago on this date BTC was at the $20,000 mark. This was its all-time high. As Godbole's article went to press, BTC was trading on Bitstamp at $3,230. This was down 83.5 percent from its high last year on this date.
Godbole argues that Bitcoin is still struggling to find a bottom of a continuing bear market. Even from the beginning of this year, when it opened at $13,880 Bitcoin is down 76 percent. It seems bound to end its three-years in a row winning streak.
The situation this year is in contrast to the last months of last year. On November 1st BTC was getting strong bids on the basis of speculation that there would be listing of bitcoin future products on major US exchanges. It was thought that institutional money would flow into the BTC market area. Bitcoin at the time was trading above $6,000.
The fear of missing out (FOMO) created what Godbole calls a self-feeding cycle as more and more investors put money into Bitcoin. The price kept going higher encouraging even more to come in. It rose to $20,000 by December 17 and many thought the price would rise much higher in 2018 as shown in the appended video.
The future looked so bright that Ari Paul now CIO of Blocktower Capital, bought 12-month call options with a strike price of $50,000 for one million dollars worth of bitcoin. This gave him the right to buy Bitcoin at the agreed price on or before December 28 this year. So Paul was betting that by December 28 this year BTC would be priced above $50,000. He was wrong of course and the option is now worthless.
A bad year for Bitcoin
Even at the beginning of the year, Bitcoin was down to $13,880 down 44 percent from its high on December 17. This might be due to profit taking. Many experts called the drop a "sell the fact" scenario and may saw it as a healthy correction.
However, in the first quarter there were regulatory crackdowns in both China and South Korea. These restrictions had a strong negative impact on the price of Bitcoin. Prices of BTC dropped to $6,000 on Feb. 6. On March 31st BTC had recovered to $7,000
BTC spent most of the second and third quarters of 2018 defending the $6,000 level and even stayed above that level after the US Securities and Exchange Commission (SEC) rejected proposals for BTC exchange traded funds (ETFs). Many were convinced that BTC had bottomed out around $6,000.
However, BTC was never able to come up with a large price bounce up after each test of the $6,000 level. On November 14, BTC dropped well below the crucial 21-month exponential moving average (EMA) a sign that the bear market descent from the high of $20,000 was not over yet. Just last weekend, BTC hit a 15-month low of $3,122. Godbole claims that BTC is showing little sign of recovery although he does admit that the charts show scope for a minor bounce up,
Chart analysis
The monthly charts shows the progression of BTC's price from the record high last December of $20,000 to the recent low near $3,100. The chart would turn bullish should BTC be able to cross the key resistance level of the 21-month EMA which is now at $5,719,
The daily chart shows a sideways breach of the falling wedge resistance meaning the breakout is not convincing. More credible evidence of a bullish breakout is needed. This could take the form of a high-volume break above $3,633. Godbole believes that this could lead to a stronger corrective rally above $4,000.
Long positions on BTC are increasing to 35,773 early today a level not seen since July 23. In the last six days long positions have increased by a third. This may show that investors are now paying more attention to the oversold conditions indicated by the 14-week relative strength index. This could indicate that BTC is in for a corrective bounce before the year's end.
Godbole's opinion
Based on his analysis, Godbole's view is: "A drop to the psychological level of $3,000 remains on cards as long as BTC is trading below the crucial resistance at $3,633. A break above $3,633 would validate the falling wedge breakout seen in the daily chart and allow a rally to $4,000. A violation there would expose next resistance lined up at $4,410 (Nov. 29 high)."
Present situation
24 hours ago BTC was trading at $3,198 reaching a low of just $3,181 since then. However the high has been $3,579.At 19:45 Central Standard Time BTC was trading at $3,492 according to CoinDesk data. Although the price has not risen yet above the $3,633 level mentioned by Godbole, BTC has recovered considerably. It has gained more than 9 percent in the last 24 hours and gained nearly $300 dollars, so that there is at least more than a glimmer of hope for a bigger rally for the bulls. There is no sign yet of a further drop. The present price of Bitcoin can be found here.
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