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Bitcoin Monthly Forecast – January 2019

Colin First

Crypto markets expressed a relatively solid performance during the month of December 2018 when compared to price action from earlier months. Price action in December has high affinity to fundamental and technical analysis and was in line with market analysis forecasts when compared to previous months which saw crypto currencies trade on news and event driven momentum. Bitcoin continued to decline in early December hitting in lows, however fund flow on hopes of year end rally and possible fund flow from Institutional investors on expectations of new bitcoin ETF hitting markets helped stage some solid recovery. The first two weeks didn’t see any major changes to bear’s grip on market and investor sentiment resulting in Bitcoin continuing to hit new 2018 lows with each passing session. The pair did see many short attempts to recover ground each of which failed miserably and was commonly referred to as dead cat bounce scenario. A clear lack of fundamental support caused Bitcoin to move as low as $3169.53 however investors’ expectations for possible year end rally and fund flow from institutional investors over Bitcoin futures which should have began near Christmas helped bitcoin stage significant recovery in last two weeks of December.

Security Concerns Caused Delay in Approval of BTC Futures Which Limited Upside Move

Bitcoin now has strong support and resistance on fundamental level at $3000 & $6000 respectively. Meanwhile $4000 serves as intermittent resistance level which if breached by a sustained rally could see pair make significant headwinds in market. On the other hand as long as BTC/USD pair remains trapped below $4000 mark Bitcoins will continue to see range bound price action. Due to regulatory approval issues, Bitcoin futures which was backed by ICE Futures U.S., the parent company of NYSE and was supposed to hit market on December has been postponed to January which is one of the key events in investor focus as trading session moves into January 2019. If the futures hit market via ICE’s Bakkt cryptocurrency platform this month it could change the entire playing field of bitcoin market as it will bring huge volume and fund flow from retail & institutional investors greatly changing price dynamics of Crypto currency’s progenitor. This event could even serve as a factor that will trigger bullish rally in BTC/USD pair to reclaim $6000 levels.  While the tentative date for said event is January 24, 2019 there is no conclusive evidence that said product will hit market on schedule and could get postponed further as CFTC [Commodity Futures Trading Commission] regulators are hesitant to approve a financial instrument that lacks proper security measures.

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The President of the Securities and Exchange Commission (SEC) Jay Clayton stated at the end of last November, “I want to see better market surveillance and custody for digital currencies before being comfortable with a crypto ETF”. In the year that should have been the institutionalization of investments in Bitcoins, up to 9 proposals for the launch of ETF’s have been rejected as regulatory authorities have deemed bitcoin related futures and ETF’s as assets which do not offer sufficient guarantees against fraudulent manipulation of the markets. In order for crypto markets to improve and recover from last year’s losses security measures require significant upgrades. In case of theft, the unwritten rule is to replace what has been stolen in customers’ accounts, but crypto market doesn’t offer such a kind of security measure hindering market progress significantly. The people in charge of the exchanges have understood correctly the necessity to guarantee the investments of their clients and as there is no urgency to approve products that does not meet said requirement, bitcoin ETF’s and future contracts are unlikely to hit market anytime soon which hints at range bound price action across the month of January 2019.

Debut of Bakkt Platform’s BTC Futures Could Put Market on Bull’s Path

Security remains a weak spot, and it is very likely that negative news in this regard will continue to appear on a recurring basis in 2019. The rapid advances in super computing make it easier every day to decipher secure keys, so the work of all those responsible for security is going to be crucial to try to eradicate these attacks. Across 2018 nearly US$1 billion worth of crypto currency tokens and assets have been lost in form of theft and since this issue is highly prevalent across globe it greatly limits investor participation which could boost trading volume even if it doesn’t serve as trigger to help bitcoin break past $4000 mark. After a year long correction which saw Bitcoin sustain loss of market capital worth several hundred billion US dollars, the next twelve months will be decisive for the long-term future of Bitcoin. In the last three days, Bitcoin has emerged from the lows and is now testing price levels near $4000 which is close to 25% increase in value compared to December lows. Commonly dubbed as Santa rally, the recovery rally helped bitcoin temporarily break past $4000 mark and gain solid support at $3500 handle which limits any sharp downside move in immediate and near future trading session. Now that bitcoin has found a bottom to its bearish rally which began in early third quarter of FY 2018-19 and bitcoin is finding increasing acceptance as valid financial instrument in various governments across globe news driven momentum is expected to keep the pair locked in range of $4500 to $3500 during January 2019 while $3000 and $6000 act as psychological support and resistance levels.

 

This article was originally posted on FX Empire

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