And we are going down!

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The price this week was traded within a $10 range, bouncing between $348 – $359 and exhibiting similar price behaviour observed weeks ago at the $370- $380 range. This is a distinctive pattern of breaking consecutive supports following after extended periods of consolidation. On December 15, morning hours Asian time price broke below $346.90 (encircled) that had held as a support for a week, forming a new bottom support at $330. With the price now at $332, another truncated sideways trend will precede a terminal breakout, and I do not expect this level to hold.

A price ran up on Microsoft’s announcement from the verge of testing $342 support. After price peaking at $364, a retracement to previous support levels tested & failed to current low $332 price.

Trading volumes continue to thin out and reflect ambivalence in market direction. As per relative strength indicators, prices are within reasonable trading range on a weekly, 3day, 1-day and 12-hour charts.
Read our weekly price forecast.

Bitcoin fundamentals

All else equal, probably the biggest news of the year was Microsoft announcing its support for Bitcoin payments through BitPay, on its Windows & Xbox Live platforms. This comes off the back of Bill Gates hailing Bitcoin as a ‘technological tour-de-force’ earlier this year in October. As the world’s third largest company per market capitalization, Microsoft has a global vision and eager to capitalize on Christmas sales. BitPay CCO Sonny Sigh brought to light details of months of negotiations that went into this deal.

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The market was generous to the news, just like Braintree-PayPal announcement in September. The price surged to the news moving up 8% right before the news before hitting a $364 resistance. The green candlesticks on the hourly marks this price reaction. Typical of markets, reaction to significant news almost always happens irrespectively of prior anticipation. In past Bitcoin price analysis, I have reiterated keenness on short market reactions to the news; returns are quick clean and rewarding – PayPal news 6% and now Microsoft 8%.

Meanwhile, the Russian Ruble suffered it lowest drop in 16 years, plunging 11% today. In the past weeks, the price of XBT/RUB has gradually appreciated since May. With the news of this decline, there is bound to be some capital flight into Bitcoin. Volumes are up as per charts – this can only peak as public interest swells.

“Analysts say the country is on the brink of a full-blown currency crisis.” – Reuters

Oil price declines to below $60 has exacerbated Russian weaknesses in a highly oil dependent economy. Capital flow restrictions and incentives pose an opportunity for Bitcoin for Russians wanting to move money past authorities. While the chart doesn’t say much, purchase of non-Ruble backed assets (including BTC) is a plausibility on the back of currency collapse jitters – diversify.

“Governments, all governments, will always do whatever is necessary to increase their power over the people and maximize revenue confiscation.” – Tone Vays

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Finally, Time Inc has joined the list of big brands accepting Bitcoin for payments for digital goods. Through a partnership with Coinbase, consumers can make subscription payments and virtual purchases with Bitcoin. Fortune, Health, This Old House and Travel + Leisure will now accept Bitcoin for subscriptions.

Accepting Bitcoins is now a ‘meh’ event, and the impact on the price has been minimal. It is going to take some seriously big news to decisively turn the price up.

Price Forecast

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Right now, the odds are tipped more on the downside, and $290 is a real possibility if critical $333 support level does not hold. The price has pierced this support, and we are a few dollars from going below monthly lows; no price rebound and it can turn ugly impulsively. The RSI indicators are above oversold levels with a cushion for imminent lower price breakdowns.

I will reiterate my thoughts on past Bitcoin price analysis about EW wave that suggests we will retest lows before a run back up to test the halfway support, $500. Wave III was $275 bottom, a retracement up to wave IV $454 and now a retest of low $300 if our count is right. A fall back into high$ 200s would shake out weak hands, fearing a break into pre-April 2013 bubble 266 high.

Looking at Bollinger bands with a 20 day EMA mid between divergence lines, oversold bounces off lower bands have been prominent; similarly for upper bands. At times, trends adhere to upper/lower bands for periods of time. Capitalize on these indicators for retracement levels, combined with Fibonacci retracement levels as scalping tools in a tight market. Always remember to apply indicators in diversity.

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Notice the series of patterns leading up to $454, and down to $332 price levels today. The pattern conversely resembles each other. Truncated sideways prices followed by terminal breakouts in either direction – up if it’s an uptrend & down vice versa. We are seemingly on the verge of a break to lower prices. IMO it is a good price to put get into Bitcoin as an investment.

So will Bitcoin go up or down this week? Share your opinions in the comments!