The above chart is bitcoin price action over the past week. After

breaking down to a low $352, the price retraced this week, spiking up to a

local high at $428 on Wednesday January 20th at 8pm UTC. The price

of bitcoin is often swayed by news speculation; bitcoin was fortunate to

receive a ton of mentions at the World Economic Forum this week, capped

off by a report by the IMF subtly extolling its value proposition. $428

peak failed right below a resistance level at $431; price went on to

retrace the whole spike down to $371. At the time of writing this,

bitcoin is trading at $399 on Bitstamp.

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The chart above, with exponential moving average lines, illustrates

support just above 100d EMA. A trading range seems to be developing,

flanked by 100d and a band of 13d, 30d and 50d. Over the coming week or

two, a pattern is likely to emerge. Similar patterns have evolved in the

past, with average lines acting as support (marked in boxes), preceding

a decisive break in either direction.

A break up or down looms, once a pattern reveals itself. The exact

direction however, rests on bulls vs bears. $352 and $428 are bear and

bull extremes respectively; a break out on either confirms a long or

short signal for traders. This range will be choppy, and the push for

territory by either side will narrow the range and force a decision.

This weeks trend of higher lows has been held up by a rising support

line from a the $198 low on August 24, 2015.

Zooming out on the weekly, an even longer support line extends back to

2013, where bottoms at $46 in April 2013, $61.3 in July 2013, and

$153 in January of 2015 maintained the trend. Inarguably, it is a

significant trend line, that now cuts at $276; a fair target for

support if price fails at point X to the downside. As it is now, it’s

already hanging on the edge of falling right through 200 MA.

Considering the ongoing kerfuffle on raising the block size or forking

the blockchain, $350 is unlikely to hold, and a breakdown should trend

to the longer term trendline at $276. It may take a couple of weeks to

complete. The potential for an upside break to $500 seems limited by

systemic risk, the fundamental issues of the bitcoin protocol.

IMF presents report on Bitcoin and Virtual Currencies at World Economic Forum

On 20th, Wednesday 2016, while speaking at a Transformation of Finance

panel at the Davos Conference, IMF Chief Christine Lagarde presented a

staff paper on virtual currencies. It is the first attempt by IMF to

describe virtual currencies, and even they admit Bitcoin poses

definitional challenges for regulators.

It is well worth a read, from the perspective of incumbent financial

institutional structures that Bitcoin will come up against. In fact, the

report highlights

some fears and apprehension held by money issuers:

“The nearly fixed supply of VCs – particularly many cryptocurrencies –

could result in structural deflation in the same way as the gold

standard.”

It goes on to admit “VC schemes have been used to circumvent exchange

and capital controls.”

Ironically, these are Bitcoin’s greatest features as a digital asset –

capped supply and censorship resistance.

Central Bank of China mulls digital currency

Reuters

reported the People’s Bank of China, is looking into issuing its own

digital currencies, saying:

“Virtual currencies can also help boost transparency of economic

activities and curb money laundering and tax evasions.”

A statement, posted on its official website

www.pbc.gov.cn, urged a PBOC research team,

looking into VCs since 2014, to craft a path to launch.

It is expected such actions would “cut the costs of circulating

traditional paper money and boost policymakers’ control of money supply.”

CFTC Appoints bitcoin trading expert to its technical advisory committee

Paul Chou, CEO and founder of LedgerX, a bitcoin clearing house and

exchange for options, was appointed as advisor to its Technology

Advisory Committee (TAC). If the company’s application to the CFTC is

successful.

“LedgerX would be the first, federally-regulated bitcoin clearing house

and options exchange to list and clear fully-collateralized,

physically-settled bitcoin options for the institutional market”

This appointment is significant, especially because the CFTC officially

recognized bitcoin as a commodity back in September 2015.

Bitcoin Weekly Price Forecast

As pointed out earlier, as of writing this, the bitcoin price sits in fickle

territory, above a support line and 200 day moving average. Traders’

sentiment is evenly split between above $400 price expectations, and a

break below $350 support to $320 targets.

Even on

reddit,

user comments by chewtoy and zapdrive are indicative of this state:

“Struggling to comprehend who is buying at $390+ after price shot up to

$425 and shot back down to $380 within 48 hours.”

“Goes the other way too. Struggling to comprehend who is selling at 390

after price shot up to 425 within 48 hours.”

This week the price of bitcoin would seem to be in neutral territory,

but with bearish expectations. A period of choppiness and sideways

movements, limited within a trading range, will persist until weak hands

are shaken off. Once price drags out long enough, in a narrowing range,

it is bound to break out decisively. All factors considered, a

continuation of the bear trend is more probable as seen in this chart

below.

$380 will be first to cave to $320.

A less probable count may push prices back up to $431, creeping up the

August $198 low rising trendline. Ideally, find continued support

heading up to $460, a resistance that has been hard to crack since the

$504 high.

In the short to medium term, a bear will subdue the market, a stepwise

grind to retest lows from January 2015. It is difficult to see where new

money or interest in bitcoin as a speculative asset will come from. On

reddit,

Erick Voorhees, CEO and founder of instant exchange Shapeshift.io

expects”

“Bitcoin price to be weak until Core demonstrates competency in social

consensus.”

“The threat of contentious fork will always loom large, and a prudent

investor can be forgiven for preferring to sit on the sidelines”