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Bitcoin Market Outlook For April 2014

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bitcoin-chart-1-month-april-1-smallMarch has been a tough month for Bitcoin, sliding from a high of around $670 down to below $450, a loss of over 30% on the month. This exchange slide came on the back of generally bearish sentiment and a succession of negative news. 

Over the last week Bitcoin Reporter has, based on the charts and other analysis, identified a fair current value for the Bitcoin exchange rate of between $500 and $550 with the Chinese bubble factored out of the market. So what does April have in store?

bitcoin-chart-1-month-april-1

As reported this week, the Bitcoin exchange rate is at a crossroads. Either the market accepts $500 - $550 as current fair value, or capitulates completely on the back of a 50/200 day moving average "death cross" down to the $350 to $400 level where it can find buying support and a solid basis for a new and sustainable upwards trend.

If the market does capitulate down to the lower level it will likely not remain there for very long as buyers swoop in to pick up BTC at a level that would probably be never seen again. If the market does not sell-off and chooses to consolidate around current fair value of $500 to $550 then the market will probably trade sideways for days or weeks while consolidating and building a new base for the next leg of the bull market.

The price slide this month has been due to generally bearish sentiment with sellers gaining the upper hand and buyers restricted to bargain hunters at the lower price levels. A succession of negative news culminating in two much larger news stories towards the end of the month, on top of bearish sentiment, caused the market to finish March near its month low of $450. These news items where the IRS ruling that Bitcoin is to be taxed as "property", effectively killing Bitcoin as a mainstream currency for USA based tax payers, and rumours out of China on Bitcoin bans become less like rumours and more like fact.

The good news is that all this news is now priced in to the market and unlikely to cause any further depression of the exchange rate. Conversely, should the IRS change its ruling or China make an official statement that Bitcoin is not to be as heavily regulated as the rumours suggest, then there would no doubt be frantic buying of BTC which would spike the price back to pre-news levels.

Most notably during March, while negative news impacted the exchange rate causing further weakness, a constant succession of good news was largely ignored, proving that the bears where in full control of the market. For the exchange rate to resume a bull trend from here, participants will need to accept that the really negative news is factored in to the market and positive news can only be positive for the future of Bitcoin and the exchange rate.

Outlook For April

bitcoin-chart-6-month-april-1

The first week of April will be pivotal for the Bitcoin exchange rate. The 50/200 MA "death cross" looms ever closer and would likely be triggered in the next week on the back of further market weakness, which could see a further $100 - $150 off the exchange rate.

To avoid this scenario the market really does need to pull itself together, and become altogether more positive, embracing the ongoing succession of positive news and accepting that the negative news has already taken its toll.

So what is the likelihood of this happening?

The market and confidence got off to a very positive start with news that the eCommerce company "Square" now accepts Bitcoin for payments, which is very significant indeed. A few more major eCommerce companies accepting Bitcoin, most notably Amazon, really would thrust Bitcoin in to the mainstream. All that would need to happen then is for the IRS to change its erroneous and restrictive tax ruling to be in line with the lack of restriction on other currencies, and Bitcoin will really take off.

Probably the biggest determining factor for market direction in April is sentiment. It has been bearish sentiment during March that has depressed the market, reacting only to negative news.

Recent polls by Bitcoin reporter indicate a change from negative/neutral sentiment to more bullish sentiment. 

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 were the results based on 276 votes.

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

 

Bullish - 41.3%

Bearish - 32.61%

Neutral- 26.09%

 

On the last day of March, Bitcoin Reporter asked people to vote on what would most motivate them to start buying Bitcoin.

bitcoin-poll-buy-motivation-april-1These are the results so far:

An extended period of price stability - 6.74%

A sustained upwards trend - 12.44%

A specific price target - 9.84%

Really positive news - 10.88%

I am already buying at these levels - 46.63%

I am holding what I have and/or have no plans to buy - 13.47%

So by far the largest vote is that the Bitcoin exchange rate is already a bargain and therefore a buy at current prices, while other participants are ready to join the buying side of the market on price stability, definite upwards trend or really good news.

This also corresponds very well to the sentiment poll where the majority of voters are either bullish or neutral on the Bitcoin market.

Analysing the Bitcoin market as a whole today, it has to be concluded that the prospects for April look much more positive than March, and that the market may well be ready to consolidate around current fair value of $500 - $550 as a basis for a further resumption in the upwards trend and new phase of the bull market.

This will probably play out during the first week in April, looking for further bullish sentiment supported by buying, which as of today looks to be the most likely scenario.

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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