TL;DR: Meh… BOOM!

The past week has seen bitcoin teetering on the edge of a tumble into a deep bear market, with the picture looking shakier and shakier. In our Friday report we noted that a key long-term support line was under threat, the price bumping along the bottom without showing any signs of rebounding with the necessary vigour to establish a reversal (http://telegra.ph/Friday-market-roundup-05-25). Bitcoin ended Sunday below the 50-week moving average for the first time since October 2015.

The weekend passed without anything of note taking place, as did most of Monday. Volumes have been low and this drift downwards signifies apathy and uncertainty rather than any cataclysmic loss of confidence. It would have been better for a high-volume sell-off to occur and bring a degree of clarity to the market, rather than such non-committal malaise. The overall impression was of reluctant, tired bearishness.

Monday evening and Tuesday morning saw a continuation and slight acceleration of selling, but $7,000 held. The next key zones to watch after that are the area around $6,500-$6,600 – which is where bitcoin came off the rising support line back in early April – and of course that $6k bottom where the market capitulated two months before that. Breaking $6,000 would be highly noteworthy, because absolutely unprecedented volumes of BTC changed hands at that level in February, marking a strong bottom.

Faced with such a picture, one has to wonder what became of the 250 million USDT minted by Bitfinex/Tether ten days ago. Have they been deployed into the market already, and the fall is despite this new buying pressure? Are the creators holding back for their moment, which is yet to occur and may take place at a return to $6,000? Are they, in fact, working to contrive such a final move down, creating the optimal possible conditions for a large buy of bitcoin?

We may have got an answer with that big green candle, which seemingly came out of nowhere this morning. The price of BTC soared $400 in short order. As yet it’s too early to know whether that was an organic upward move, the Tether dollars hitting the system or just a blip in the broader downtrend. Sentiment can change in an instant, though – so be prepared.

Whatever happens, remember that with bitcoin, surprises should no longer be surprising. Expect the unexpected.

Somewhere between the extremes, buried between the snorting of the bulls and the wailing of the bears in the no-man’s land where few think to trade. That’s the most likely thing to happen.

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