Is Bitcoin Stability A Prelude To Volatility?
Ben Myers | Sep 23, 2014 10:19AM ET
After a period of marked volatility, the markets seem tranquil. But could this be another scene of calmness before the storm? In the last 24 hours the Bitcoin's price has been testing the $400 level, with less-volatile fluctuations. It seems that the price has stabilized at the $400-$395 level for the moment. The price action is below the pivot point today at $418. Any further declines will be tempered by the support level at $359.01 and $318.48. These levels may be the catalyst for a reversal of the current downward trend, as at lower prices, more buyers will be tempted to enter the market.
Bitcoin can offer a lot to the charity sector, as low transaction fees for international payments means that recipients of charity can receive more the funds raised. Greenpeace is one of the charities that has recognized Bitcoin’s potential to transform how charity funds are distributed. Greenpeace announced today that it will accept donations in Bitcoin and signals a possible shift towards Bitcoin and Blockchain technology to make charities more efficient and transparent. Also, Bitcoin makes it possible to send small payments at virtually no cost, so now it is economically feasible to make micropayments to charities. This development should entice more non-profit organizations into the Bitcoin space and encourage adoption, increasing the value of Bitcoin.
European Regulation
The Spanish government has introduced new regulations regarding Bitcoin, which are friendlier than the current draft regulations proposed in New York. The Spanish government now regards Bitcoin as an electronic payment system and are starting to see it more as an asset, in contrast to policymakers in the US who are treating Bitcoin more like a currency. However, the announcement does not mention to other innovations relating to Bitcoin and focus solely on the payment system utility of Bitcoin. Also, this could be interpreted as a negative development as the regulations will increase the costs of Bitcoin businesses and the announcement may lead people to think Bitcoin’s only offering is as a payment system.
Also, Belgium has declared that Bitcoin trades will not be subject to value added taxes, however, it is suggested that this is not permanent. The Belgian position is likely to change as the European Committee takes a stance on the issue. The decision by the European Court of Justice on whether value added tax is applicable to Bitcoin in EU countries is likely to take up to two years.
The hourly chart below shows the price action for Bitcoin on the Bitstamp exchange. The Ichimoku cloud is currently acting as resistance, at the $402-$410 level for the next two days. The base line is above the conversion line, indicating bearish momentum. Also, the price action is below the base line, also signalling bearish momentum. Momentum will favor the bulls if the price closes above $399.
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The 4-hour chart below shows the price action, along with the parabolic stop and reversal and the stochastic. The parabolic stop and reversal indicated the start of a downward trend yesterday afternoon. This trend is likely to continue over the course of today, as the stochastic implies that the market is not yet oversold. This is indicated by the stochastic, as it is still above the 20 level and is heading in the downward direction.
At the hourly timeframe, the price is breaking out of the Bollinger bands in the downward direction, which suggests a large downward swing is imminent. The price could go as low as $318 if this move is maintained. However, since the market is trading sideways, if losses are limited by the $390-$380 level, it is expected that the price will tend toward the middle Bollinger band at the $400.85 level.
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