This week on Planet Bitcoin - 8 April 2016

Friday 08 April 2016

TL;DR a casual saunter along at present, but not without grounds for optimism.

It’s a case of ‘more of the same’ after last week’s malaise, punctuated by the occasional jitter in the market that suggests we’re almost, but not quite, ready for something a little more exciting.

Bitcoin has drifted along between around $410 and $425 for the past week, though moves above about $420 and below $415 have not been hugely convincing. Looking at the chart for the whole month (see below) you can observe we’ve broadly been tracking along on the same level, with any sharp moves outside of a fairly narrow range soon being reversed.

Monthly chart

Where does that leave us? Well, as I’ve stated repeatedly in the past, this isn’t a blog that goes in for technical analysis (or trading advice, so disclaimer: caveat mercator), but the technicians are noting bullish patterns if you care to hunt around the web for them - basically things are consolidating nicely within a triangle that is shortly to close, leading to a breakout. And since the wider picture is upwards, and fluctuations in price haven’t seen lower lows in the short term, they suggest that’s good, on balance.

Translating these sentiments into something more human, we might suggest that when the price remains at roughly the same level for a long time, anyone who is inclined to sell has had the opportunity. Aside from the odd panic buy and sell, we haven’t seen many big moves, and so the market (the collective impact of thousands of traders) has a chance to value bitcoin a little more objectively and less emotionally for a change. There has been room for the implications of big movements in the past months to unwind. It’s reasonable to expect that under these conditions, the sellers might run out and new buyers come in from the sidelines.

The health of the ecosystem

A couple of further factors may be influencing that sentiment. First is that the block size debate has calmed in recent weeks. Payment times are back to normal and there are no signs of problems with the network as it stands - reason for slowly returning confidence after the existential uncertainty of earlier this year. Not to say it won’t rear its head again, only that the present calm is encouraging, especially for those of short-term horizons. A SegWit release is due this month, which might foster further optimism at this point. And there’s the impending block rewards halving this summer. All of these point to medium-term upward pressure.

Also of note is that Ethereum has quietened down a lot recently, with volumes of only a fifth of their previous levels on the most popular exchange. Odds on some of that attention has turned back to bitcoin.

Lastly, the mainstream global economy doesn’t look too much healthier, and bitcoin’s fortunes are often inversely correlated with those of the regular markets. The Bank for International Settlements has recently cast doubt on the efficacy of negative interest rates in raising inflation, though most of the unwanted effects of this policy haven’t filtered through to retail depositors. Yet.

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