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Bitcoin Market Analysis: 31 March 2014

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bitcoin-chart-10-day-march-31-smallThe Bitcoin exchange rate continued to weaken to the end of March as sellers maintained the upper hand, and further news and rumours, now looking more substantiated, conspired to depress the market further. A week of rumours out of China gained more substance today as at least one exchange froze deposits following an apparently official notice from the Chinese government.

Although the charts indicate fair value for BTC at between $500 - $550, continuing bearish sentiment prevails.

 bitcoin-chart-10-day-march-31

Although a recent market sentiment poll carried out by Bitcoin reporter showed that the majority of those voting are either bullish or neutral on the market, these buyers are holding and waiting for evidence that the price slide has been halted, and probably an up-trend has resumed. In the absence any of such evidence sellers are dumping BTC in to the weakness and any buyers are only prepared to bargain hunt at lower levels, putting constant downward pressure on the price.

The 6 month moving average on the 6 month chart intersects the market at around the $550 mark, indicating a current fair value in a weak market of around $500 to $550 dollars per BTC with China largely factored out. This fair value would only be realised however if buyers would come back in to the market in a serious way to support the price at those levels, which has not been the case so far against a continuing backdrop of bearish sentiment and negative news in the form of the recent IRS tax ruling and rumours out of China.

Today, just as the market was recovering towards fair value having climbed back $470, more negative news came out of China that at least one Bitcoin exchange has now received official notice from the Chinese government that all deposits are to be halted, confirming the rumours of the previous few days.  The news immediately caused a further sell-off in BTC with the price sliding below $450, but which was tempered by the fact that most of this news had already been priced in to the market during the rumours of the last few days.

The price has since recovered back above $450 indicating that the Chinese situation is now fully factored in to the exchange rate, and unlikely to suppress the market further in future. 

A poll carried out by Bitcoin Reporter over the last couple of days asked whether Bitcoin participants are currently bullish, bearish or neutral on BTC. These are the results so far based on 276 votes.

bitcoin-poll-bullish-bearish-sentiment-march-31

 

Bullish - 41.3%

Bearish - 32.61%

Neutral- 26.09%

 

So the bulls outnumber the bears with those bullish or neutral are in the majority of 67.39%.

These data suggests that although the majority from the sampling of participants are still optimistic about the prospects for Bitcoin, they are not willing to commit to buying in to the market until overall sentiment is more positive, and the market at the very least shows stability and preferably a sustainable up-trend.

Of course, while buyers continue to sit on the sidelines the bears are driving the market downwards, not giving the bulls any market entry point, so overall unless there is a change in sentiment or the selling fizzles out, the market will remain under downward pressure for the immediate future.

Market Prospects 

bitcoin-chart-6-month-march-31

The charts are looking more ominous by the day with an approaching "death cross" of 50 day moving average approaching the 200 day moving average. If the 50 day MA moves through the 200 day MA - the "death cross" - then the market could easily be set up for a further $100 to $150 off the exchange rate. 

Although China is probably firmly factored in to the exchange rate and unlikely to exert any further influence, the recent IRS tax ruling, which has killed Bitcoin for use as a mainstream currency in the USA, will continue to weigh heavily on the market until and unless the IRS ruling can be modified to allow free use of Bitcoin as a currency without any tax burden, either financial or administrative. Since the IRS ruling was clearly politically motivated to protect the US Dollar, then such a ruling change will not come easily or overnight and will require heavy ongoing lobbying in Washington by the Bitcoin community - particularly by the Bitcoin Foundation if they actually justify their existence.

This coming week will probably be pivotal for the Bitcoin exchange rate, with either a halt in the slide, extended consolidation around $500 before a new up-trend resumes, or continued weakness and selling pressure will close in on the "death cross" and another 25% to 30% off the market.

Note: The foregoing represents our own analysis and opinions, and in is in no way intended to be investment or financial advice of any type.

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