We have hit a yearly low, but have not yet revisited the low for this market cycle. Yet.

Bitcoin has been trending down all year, but it seems like we might finally be approaching the endgame for this cycle. We’re not at capitulation yet, but after a period of consolidation, it’s grinding closer.

For the last week or so BTC has traded sideways around the $3,500 level. What we have seen repeatedly is rapid jumps up or down and then back to the mean. These are not normal market movements. They start and finish within just minutes, leaving long candle wicks of 2-3%.

This is consolidation within a range, with market-makers taking potshots here and there at traders who are over-leveraged without proper risk control. Big players (most likely using bots) are simply margin-hunting in an environment of low liquidity. The expectation was always that this would end like the other consolidation ranges did: with a big move.

Yesterday saw a sharp fall, but a clean bounce off the fib line. We have just now seen a further drop below that, with a low (at the time of writing) of $3,322 (Bitstamp). But we do not expect that to hold for long.

The pattern continues: lower high, lower low, trending down towards that 200 weekly moving average and the $3k zone. That is where we expect the fireworks to happen in earnest as traders panic that the last line of defence – as they imagine it – becomes threatened. And since that is such an important area, we do not expect capitulation to happen and for the next cycle to start until that area is attacked with greater volumes than before.

Let’s be clear here. We are expecting a crash of epic proportions below $3k. It may well last only hours, but when a market like bitcoin panics, it can be spectacular. If you trade, set a skunk order down low, because anything can happen – including flash crashes right down to zero if a big trader panics or fat-fingers. What happens after $3k is breached will depend on the market’s reaction. A strong bounce would be positive; a weak bounce would imply the bear market will continue for some time longer.

In other news…

Steve ‘Woz’ Wozniak, Apple co-founder and bitcoin fan, has said that he sold all his bitcoins at the top. ‘When it shot up high, I said I don’t want to be one of those people who watches and watches it and cares about the number. Part of my happiness is not to have worries, so I sold it all and just got rid of it.’

Minor exchange Liqui has shut down, after its users did not agree in sufficient numbers to the changes to its terms.

And according to Jan Van Eck of VanEck bitcoin ETF fame, former BTC investors are turning to gold in the bear market.

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