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Forex Analysis & Reviews: Bitcoin at a crossroads: correction or consolidation before a breakout?
time 12.09.2019 08:53 AM
time Relevance up to, 14.09.2019 08:12 AM

The value of the key digital currency again approached the psychologically important mark of $10,000. Yesterday, the price reached a local minimum of $9.891), but then pushed off and currently around $10.152. On the one hand, this rebound suggests that the currency is in a phase of consolidation. Therefore, both bearish and bullish positions now look risky. Incidentally, this is evident in the technical picture. On the other hand, over the past 10 days, Bitcoin has been going through hard times as it drops by 4.5% (weekly), while the capitalization of the instrument fell to $180.4 billion. A steady downward movement was recorded as early as September 4, but the decline in price at the beginning was quite smooth with very significant price kickbacks. However, a sharp downward impulse followed echoes of which are still felt on Friday. The currency broke through the middle line of the Bollinger Bands indicator on the daily chart, but could not stay lower. It is now trading on this line, thereby demonstrating the insecurity of both bulls and bears.

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It is noteworthy that the past days were not saturated with any important news that would relate exclusively to the world of digital currencies. In my opinion, the dynamics of the military-technical cooperation are correlated with the dynamics of the US-Chinese trade war. This relationship is getting clearer, especially if you look at the weekly #Bitcoin chart. During the periods of the escalation of the trade war, the demand for digital currency increased, indicating peak price values. According to many experts, the Chinese are using the figure as a protective tool, especially after the People's Bank of China "let go" of the renminbi paired with the dollar above the key mark of 7.001. Until the end of summer, tensions between the parties to the conflict were growing and China's unexpected steps to introduce countermeasures only increased panic in the markets. During this time period, the dynamics of bitcoin was very clear and vice versa. As soon as the period of "thaw" between the countries began, the key digital currency weakened its grip, trading in virtually flat. It is a fairly wide range, but still in the flat.

Let me remind you that since the beginning of summer when it has completed its upward trend completed in several months, the bears repeatedly tried to go below the 10-thousandth mark. Sellers have attempted to assault a psychologically important level at least five times in the past few months. However, as soon as the price reached a powerful support level of $9,400 (this price outpost has been held since the beginning of summer), Bitcoin attracted buyers, after which it returned to its already familiar price niche of $10,100 - $10,500.

Nevertheless, the flat is short-lived despite the protracted nature of the current price fluctuations. According to many analysts, a triangular formation is being formed at the moment, followed by a strong impulse price jump in one direction. This should happen in the medium term, that is, in only a few weeks. In fact, as for the key question on which direction the price will go has no definite answer, unfortunately.

According to some experts, in two or three weeks, bitcoin will be in the region of 8 thousand. On the contrary, others say that the price will increase to 13 thousand. The signals of technical analysis are rather ambiguous, while the fundamental factors are more tangible. In my opinion, the price dynamics will largely depend on the outcome of the 13th round of negotiations between the US and China high-level meeting, with the participation of Chinese Deputy Prime Minister Liu He, US Treasury Secretary Stephen Mnuchin and US Trade Representative Robert Lighthizer. The financial world froze in anticipation of the outcome of this meeting, and the digital currency market (especially with regard to bitcoin) was no exception. If the negotiations culminate in another failure, anti-risk sentiment in the market will prevail again. The yuan will again begin to fall in price, determining the increased demand for the figure.

At the moment, the conflicting parties are demonstrating their disposition towards dialogue. In particular, China abolished duties on certain goods from the United States. The Chinese government decided to remove additional tariffs of 25% on 16 categories of goods from September 17. In turn, Trump announced a decision to postpone the increase in duties planned from October 1 from 25 to 30% for Chinese goods worth $250 billion. Formally, this is due to the fact that the People's Republic of China will celebrate its 70th anniversary, but there is another opinion: the White House postponed the introduction of duties for 2 weeks (until October 15), so as not to overshadow the negotiation process, which will only take place during this period.

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Thus, taking into account the prevailing fundamental background, it can be assumed that bitcoin will still be traded in a wide-range flat. Bears will continue to attempt for a breakthrough at the $10,000 level. However, the demand for the digital currency will grow when it approaches the $9,400 mark that will determine a corrective pullback. A strong surge in interest in the TSA can be caused by a price movement above the 11,000th mark or vice versa - below 9,000. If trade negotiations are frustrated before they start (this scenario can't be ruled out), the upward PTS movement will be impulsive. In this case, the bulls can easily overcome the mark of 11,000 but if you exclude this scenario from the considered ones, such price fluctuations look unlikely.

Irina Manzenko,
Analytical expert of InstaForex
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