“We’re in the middle of the bear”; Bitcoin price dips, and analyst gives downbeat take on the rest of 2018

Noted technical and fundamentals crypto-analyst has urged caution to those predicting a bullish end to 2018 for Bitcoin, as the price of the most-traded cryptocurrency drops back below $6,300.

Updated at 8am, September 18th, 2018.

At around 3pm yesterday afternoon (GMT+1), the price of Bitcoin began as dip that saw it fall by around $200 in a little less than two hours. It was a move that wiped out the recovery that Bitcoin’s value has struggled to make over the last week.

Since the fall, which briefly took the price below the $6,250 mark, Bitcoin has found resistance at $6,300 – which it failed to break on two occasions. It is now sitting on support back at the lower price.

(Update: Bitcoin has since traded largely sideways overnight and now sits at $6,278). You can see an up-to-date price here.

 

 

By way of commentary on the current market conditions, which have seen sentiment among watchers oscillate pretty wildly over the last few weeks, Willy Woo – creator of the Woobull analysis blog and noted twitter crypto-commentator – has taken to social media with something of a tweetstorm. In it, he breaks down why he thinks September’s pickup and breakdown of Bitcoin’s fortunes harks back the 2014 bear market, and explains why Galaxy Digital main-man and noted crypto-investor Micheal Novogratz may be wrong calling a bottom to the 2018 crypto bloodbath.

His opinion centres around two indicators. The first is the 200-day moving average for Bitcoin (a simple average of the price over the last 200 days prior to any given date) which Woo notes has been surpassed by the daily price of Bitcoin at the end of both (as he sees them) previous crypto bear markets.

At the current time, however, he identifies the 200-day moving average as point of resistance for the price of Bitcoin – a line that it’s daily price has bounced off on four separate occasions this year, the last of which was in early September.

The second of his indicators is one that Woo has championed via his blog. He calls it the NVT Ratio, as it relates Network Value to Transactions.

It considers the price performance of Bitcoin (Network Value) in relation to activity on its blockchain, and has been touted as something close to a fundamental analysis of a cryptocurrency. It’s calculated by dividing the market cap of Bitcoin – which today is around $109bn, according to CoinMarketCap – by the the daily dollar volume transmitted through the blockchain.

Woo asserts that, when the NVT Ratio is high (above 100) it shows that the valuation of the cryptocurrency is outstripping the amount of value actually being passed using it. Currently, the NVT ratio is high, very high – 189, in fact. The last time Bitcoin’s Network Value so exceeded its transactions was 2011, when the BTC price was less than $1.

This high NVT, Woo says, is an indication that the current low volumes in the Bitcoin market are not – as some are saying – indicating an ‘accumulation phase’, the first sign of a bull run for those who apply the Dow theory of a three-trend market, but that we’re in fact a long way from the end of the bear market.

In fact, Woo goes one step further by drawing a comparison to the 2014 market, when similar conditions created a so-called ‘bull trap’ in the middle of a downward trend. Then as now, NVT was high (187), price bumping up against but not crossing the 200-day moving average, and volumes were low.

This leads the analyst to conclude that, if NVT Ratio is to be trusted (he pitches it as experimental, but a metric that seems a solid – if slow reacting – indicator of shifting sentiment during back-testing of the theory) that we’re currently “months away” from the end of the current bear market. However, he does point to NVT Signal indicator (an adaptation of the NVT Ratio methodology)  as a possible place to look for signs of a shift.

It would seem that the next few weeks could prove not only to be vital to the ongoing fortunes of Bitcoin, but also to the concept of NVT as an indicator of its performance and the state of its ecosystem as a whole.