It's hard to escape the conclusion that bitcoin has taken something of a battering over the last few weeks. Ultimately the Shrem arrest, situation in Russia and Mt Gox melt-down proved too much for market confidence and price has taken a bit of a tumble.
From a technical perspective, the rules never change as this young market proves as susceptible to the laws of support and resistance as any I have ever traded.
Let's pull up a chart to review the situation and you'll see what I mean:
In our last post we stated that a concerted move down through $765 (BitStamp) would result in a retest of channel support at around $710. In the event this is exactly what happened and since then you can see just how significant this price point has become as price pivots around it.
The bad news is that the last attempt to drive back above it and into the channel was successfully countered and at the time of writing, resistance sits above the market like a big black cloud. Based on what we see here the most probable scenario is further drive South to retest the downside limit of the recent plunge at $620.
However, should this occur the market will be confronted by a powerful co-incidence of horizontal and rising support.
In the meantime, worried bitcoin bulls will be hoping for a rally from where we currently sit and this isn't out of the question. While $720 has been rejected once in the last 24 hours the market hasn't fallen far as a result and if it does manage to break back and hold above $720 within the next 24, a retest of $765 as resistance is likely and if this gives the market will target the far side of it's old descending channel, currently at around $800.
So, as ever, bitcoin lives through interesting times. Under attack from all angles its valuation is currently under pressure but looked at another way its resilience is simply amazing. If you asked any Fortune 500 CEO whether they would accept a 20% drop in their share price in exchange for coincident news of the closure of all their outlets in major country, the loss of a global primary sales channel and the incarceration of one of their highest profile board members, they would bite your hand off.
Bitcoin really is the honey badger and we shall be buying more at $620 if we get the chance.
See you there...
Rob @ BitScan