Bitcoin Market Analysis 02/17/16

Bitcoin is back on a bull run and broke out above $400 for a peak of $420. The last major price correction brought prices down to $350. This shows that bitcoin’s support floor is getting higher with every correction. The first correction in this bull cycle bounced off of $300 support.

Bitcoin is slowly breaking out of a large 4 month triangle and if this trend continues than a retest of $500 seems likely. The block rewards are getting halved this summer, so I wouldn’t be surprised to see prices break above $500 into new highs.

A breakout above $500 would be a third wave up on this new bull cycle. Each wave starts off as a healthy trend and then corrects itself when prices become exaggerated. Should this trend hit new highs then the next major correction may be a pivot off of $400.

China Capital Controls

Once again China started this last bitcoin bull run, taking a 4% lead over the USD exchanges. The Chinese economy has been hit hard and the government is cracking down on capital flight. Chinese citizens are looking for a way to hedge against the falling markets.

Some Chinese companies have been circumventing capital controls by setting up fake international lawsuits. They do this by forming another company to sue from out of the country and purposely losing the case. This makes everything seem legit and the awarded claim helps funnel money out of the China. This seems like an expensive and complicated way of doing things, especially since it takes little effort to buy and send bitcoins.

Bitcoin is one of the easiest and cheapest ways to move money internationally. There will likely be another growth spurt as more Chinese investors discover the utility of Bitcoin.

Ethereum Pump

During the last major dump of bitcoin, every crypto reddit account was privately spammed with an announcement that ethereum would soon replace bitcoin. Ether trading volume started to increase, rising from a few hundred thousand to a peak of $30 million. The price of ether also shot up over 500%, making it a solid #2 for market cap.

Ether eventually went parabolic and peaked out around .018 before a 50% crash in price. Ethereum is an amazing platform with bullish news of being integrated into Microsoft Azure. That said, this recent bull run does have many of the hallmarks of a classic pump and dump.

It’s possible that whoever spammed everyone’s accounts was accumulating cheap ether once prices bottomed out. The block size FUD and excitement around ethereum was leveraged as the perfect storm for a pump.

The price of ether is slowly making its way down as traders unload coins to catch this latest bitcoin rally. Ethereum does have good long term potential as an investment but organic healthy growth is much more sustainable than a strong pump.

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Dan Bainbridge

Dan Bainbridge is the founder of BitcoinAliens.com and CoinAd.com. He writes about bitcoin focused marketing strategy on this blog, and day to day strategises the growth of the Bitcoin Aliens media portfolio. He likes surfing and swimming.