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Is bitcoin a bubble?

Bitcoin: Is there a bubble?

Following the Ban on Bitcoin exchanges in China, Bitcoin saw a 39% drop against the USD between the 1st of this month and the 15th, from its all-time high of $5000 back to $3000.
It then managed to regain 36% to take it back up to the $4000 level within 3 days.

The question now remains where is the cryptocurrency headed and is there a bubble?

The fact that a ban in the China market that only controls about 10% of bitcoin trading activity caused such a decline in price reveals the volatility and fragility of the cryptocurrency.

Is there going to be another geopolitical event that will bring bitcoin down? Bitcoin enthusiast says no while many major hedge managers say yes.

Another factor to consider is that there is a possibility of another FED interest rate hike in December, which would steer investors away from safe-haven asset classes possibly causing a further decline in the bitcoin price.

Let’s take a look at the current technical analysis.

Thursday’s candle posted a strong bearish engulfing candle and Friday’s candle showed very little sign of recovery, possibly Indicating further downside.

The key level to look out for is the $4000 area which is currently also the 50-day moving average.

Should we remain below the $4000 area we could be heading back to the $3000 support zone.

The MACD is also showing bearish tendencies.

On a positive note, the 50-day moving average is well above the 200 day moving average indicating that we are still in a long-term bull trend.

Should we see a further decline in the bitcoin price it could be an opportune time to buy preferably around the $2500 area.

Stanton Roux

Stanton Roux

Algotrading.co.za is a free online learning platform that merges my two passions software and trading. I like to bring a new twist to trading and show how software can improve your trading skills.