AAX Research Report: Focus on BTC, ETH & LINK in this issue
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Bitcoin Wyckoff Analysis Review
BTC/USD Wyckoff Analysis
Last week we did a comprehensive analysis of all possible Wyckoff distribution phases for BTC. Through the basic knowledge of Wyckoff's market cycle and the analysis of the possible cycle that is currently occurring, as shown in the figure below, BTC may be currently in an overbought state.
BTC/USD market cycle
In today’s report, we believe that BTC may fall in the near future, and BTC has shown signs of weakness—it is only a matter of time before BTC prices fall from their highs.
BTC/USD price gains
However, Bitcoin has experienced an amazing rebound in the past few days. The price of BTC has risen from more than 9,000 US dollars to close to 9,600 US dollars, a 6.51% increase in 7 days. So this increase, is it because the dealer’s exit plan made them set a trap? Or will it be the beginning of a new round of BTC bull market?
The recent shape and trend of BTC
BTC recently formed a descending triangle followed by a bullish breakout as shown in the chart below.
BTC/USD descending triangle
This triangle formed for 12 days before the breakout occurred. After the breakout, BTC touched the 0.618 Fibonacci retracement level of the triangle tip – as seen in the chart below.
BTC/USD Fibonacci Index
BTC failed to break through the 0.618 Fibonacci level significantly, and the price of BTC fell from around $9,500 to nearly $9,000, which is the price before the breakout. After this, the BTC price traded sideways, as indicated by BB (Bollinger Bands) and BBW (Bollinger Bands Width).
BTC/USD sideways trading
Since then, BTC has continued to actively break through, and the price has repeatedly tested the upper area of the Bollinger Bands.
Can this wave of gains continue?
Many indicators are currently bullish on the 4-hour chart:
SAR Parabolic – Prices are above the SAR with no signs of slowing down at the moment – Bullish.
Ichimoku – price is above the cloud, which is also currently green – bullish.
BB/MACD - Green Cloud - Bullish.
BTC/USD bullish indicator
BTC/USD Bollinger Bands (BBs)
We should note that the RSI is at extremely high levels, which means a minor pullback is likely. If BTC is able to use the 20MA (center line) of the Bollinger Band as support to allow the RSI to resume, then this will point to an issue where Wyckoff analysis indicates that the LPSY is too early. On the other hand, if BTC fails to find support at the centerline and continues to hit the downside band, then this would be a major bearish indicator — signaling a major reversal in the uptrend that began in March. The current Wyckoff analysis is therefore maintained.
BTC/USD price target
If BTC rises, the first target price will be $10,000, which will greatly increase the probability of being bullish in our current position, which will bring a 4% gain.
The second price target for BTC will be $10,250. If this price is broken, then the Wyckoff analysis will be invalidated. This would yield a gain of 6.25%.
BTC/USD target price
The second bearish target is $8,620. A break below this level would justify a new bearish price wave, representing a 10% loss for BTC from its current position.
Ethereum
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ETH Fibonacci Analysis
ETH/USD Fibonacci
ETH has seen a sharp rise in recent days, finally breaking through the 0.786 Fibonacci level that has held ETH back for 52 days. ETH has tested the 0.786 level several times during this period - as indicated by the blue arrow.
Fundamental analysis of this price rally
One of the reasons this mini rally happened is because of the upcoming release of ETH 2.0. ETH 2.0 will go live by the end of 2020, and the cryptocurrency community is getting excited about the new possibilities it offers. One of the main features of ETH2.0 is improved scalability.
ETH/USD Heikin Ashi
Scalability remains an important issue for Ethereum, with major network issues occurring during the 2017/2018 ETH bull run. However, it is said that this years-in-the-plan update will address this through ETH sharing.
Benefits of Ethereum for businesses:
Permissioned or permissionless network — Ethereum can be used in both private and public networks.
Data Harmonization - By using a decentralized network, it allows businesses to enhance data coordination - replacing the need for expensive central servers.
Asset Tokenization — Allows businesses to increase the size of their target audience.
The implementation of ETH 2.0 should increase the adoption and viability of the above options. So, from a fundamental point of view, this is the reason behind the rise in the price of ETH. However, the recent pump wasn’t just because of some big ETH news, as evidenced by the chart.
ETH ascending triangle
ETH/USD Triangle
As the chart above shows, ETH has broken out of an ascending triangle pattern in a positive direction. This pattern formed for 72 days and had many touch points - adding to the validity of the triangle.
Due to the length of the formation and the size of the breakout, a 100% Fibonacci retracement is highly likely for ETH, which would see ETH hit $290. A move to $290 would give us a 5.55% profit on our current position.
ETH/USD PnF and SAR
In summary, we can clearly see that ETH is currently bullish. That's because all of the aforementioned indicators are currently bullish -- with few signs of slowing down.
ETH target price
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ETH target price
ETH rising target price
If ETH rises, the first bullish price objective would see ETH hit the 100% Fibonacci retracement level. That's $289, a gain of about 5% from the current position. As the mentioned indicators and patterns show, the odds of this happening are high — although nothing is certain in cryptocurrency.
The second bullish price target is $318. To achieve this, ETH needs to break above the 1.0 Fibonacci level, which is likely to encounter significant resistance. A move to that level would be a 14% gain.
ETH drops target price
The second bearish target is $220. The probability of this happening is very low and it goes against indicators and patterns. However, a downside to $220 would cause a 20% loss and would see ETH return to the trading range it was in prior to the uptick.
LINK
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Analysis review of last week
LINK/USD
Having said that in last week's analysis, the current trend is bullish, however, there is likely to be a healthy pullback towards the BBs' 20MA. This pullback occurred while maintaining the bullish momentum.
up and down index
LINK/USD bullish
LINK/USD bearish
in conclusion
As the table above shows, many indicators have turned bearish in the last week. However, it is also important to note that LINK has encountered resistance at $7.2. There is a balance between bullish and bearish indicators; although currently it appears that LINK is leaning toward a continuation of a bullish move — or at least a sideways trading period, rather than an immediate decline.
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business news
Brexit talks stalled - Brexit talks between the EU and the UK continued this week. The two sides have reportedly made no significant progress, with major disagreements emerging over UK-fishing waters and rules for businesses. The EU has set 15 October 2020 as a summit for the UK to reach an agreement with the EU. The EU is currently under enormous pressure, with many countries within the EU facing rising GDP/debt ratios. There are tensions surrounding the so-called Italexit (Italy's exit from the European Union).
Gold Surges - Gold is near its all-time high in 2011. Gold is currently valued at $1,865, having risen sharply since its 2016 low. Demand for gold has been increasing recently due to its safe-haven asset nature.
