Bitcoin capital gains tax in France is 45%, and anyone who is currently into crypto trading will pay a capital gains tax for their profits. A new proposal to reduce the capital gains tax on Bitcoin from 45% to 19% has been introduced. There has been a true ongoing battle to change this law, but this positive development, France could be a real example to other countries.
If you are a U.S. resident that invested in Bitcoin or other cryptocurrencies in 2017, you may have recently received a tax document from the trading platform or cryptocurrency exchange you use and may need to pay taxes. While there is currently very little guidance on the taxation of cryptocurrency, one thing is clearly defined. The Internal Revenue Service (IRS) views cryptocurrency as property for tax purposes. That means you likely received a tax document because you either experienced a capital gain on that virtual investment in 2017 or received cryptocurrency as compensation, which is seen as ordinary income to the IRS.
For practical purposes, the IRS has issued guidance defining cryptocurrency such as Bitcoin and Ethereum as virtual currencies. This guidance is subject to interpretation, but for most people the main things to consider from a tax perspective are:
- How long you held your Bitcoin or other cryptocurrencies from purchase to sale? If held for less than a year, any profit may be liable for short-term capital gains tax. If held for longer than a year, any profit may be liable for long-term capital gains tax.
- What is your tax filing status and taxable income? That will determine your tax bracket and the tax rate on any Bitcoin profits.
- What is your state tax rate? That will determine how much you may owe in state taxes.
Bitcoin Tax Calculator Instructions
Part 1: Enter Your Personal DetailsStep 1: Select the tax year you would like to calculate your estimated taxes.Step 2: Select your tax filing status.Step 3: Enter your taxable income excluding any profit from Bitcoin sales. For most people, this is the same as adjusted gross income (AGI).Step 4: Enter your state’s tax rate.
Part 2: For each Bitcoin sale within a tax yearStep 1: Enter the purchase date and purchase price. The purchase date can be any time up to December 31st of the tax year selected.Step 2: Enter the sale date and sale price. Make sure the sale date is within the tax year selected.Step 3: Repeat for all Bitcoin or cryptocurrency sales within the tax year selected.
Example Bitcoin Tax SituationThis example calculates estimated taxes for the 2018 tax year for a person that made two sales. All values are in USD.Person A Tax and Finance Details2018 Taxable income – 80,0002018 Filing Status – Single2018 State tax rate – 5%Transaction #1On Feb. 1, 2018, Person A sold Bitcoin for a total of $10,000. That Bitcoin was previously purchased on June 1, 2017 for $5,000. Since it was held for less than a year, the $5,000 profit is subject to short-term capital gains tax rates. Based on Person A’s filing status and income, the taxes are calculated as follows:
- The first $2,500 in profit is taxed at the 22 percent federal tax rate.
- The remaining $2,500 is taxed at the 24 percent federal tax rate.
- The entire $5,000 taxed at the 5 percent state tax rate.
- The entire $7,000 is taxed at the 15 percent long-term capital gains tax rate.
- The entire $7,000 is taxed at the 5 percent state tax bracket.
Article written by TaxAct
You might be aware that your Bitcoin or other cryptocurrency transactions have a possible taxable impact. However, you might not know exactly how to report them. You can use this bitcoin tax calculator or read on for more guidance on cryptocurrency taxes.
What is Bitcoin?
Bitcoin is a worldwide payment system where users buy virtual currency using an exchange. The Bitcoins are stored in a digital wallet and can be transferred using a mobile app. No bank or other intermediary institution is involved.
Bitcoins can be used as a digital currency to send or receive funds, pay for goods or services, or simply for investment. Transactions are anonymous and are tracked only via the digital wallet identifiers on a public ledger. Originally used by illicit operators, mainstream companies such as Overstock.com now accept Bitcoin as payment.
Enter the IRS
The Internal Revenue Service (IRS) isn’t blind to Bitcoin and provided guidance about “convertible virtual currency” in its Notice 2014-21.
The IRS defined convertible virtual currency as virtual currency that has an equal value in real currency, or that is a substitute for real currency.
The IRS specifically referred to Bitcoin as a type of convertible virtual currency that can be digitally traded. In addition, you can buy or exchange virtual convertible currencies into U.S. dollars or other real or virtual currencies. However, virtual currency itself does not have legal tender status in the U.S.
“Though cryptocurrencies seem like a brand-fangled new investment, one with which our, by comparison, antiquated tax system can’t compete, they are actually taxed like pretty much any other mundane item,” emailed Mark Durrenberger, Certified Financial Planner®, Enrolled Agent and author of The Modern Day Millionaire.
If you sell, exchange, or use convertible virtual currency to pay for goods or services, you might have a tax liability. For tax purposes, the IRS treats convertible virtual currencies as property. If you receive Bitcoin as payment for goods or services you provide, then when you compute your gross income, you must include the fair market value of Bitcoin in U.S. dollars as of the date you received the Bitcoins.Durrenberger gave the following example:
“If you buy Bitcoin for $100, and later sell it for, say, $1,000, [y]ou would owe capital gains taxes on that $900 gain. If you held that Bitcoin for less than one year, the tax rate would be whatever rate you pay on your regular income. If you held it for longer than one year before you sold, you are taxed at the more favorable (i.e., lower) long-term capital gains rates,” Durrenberger said.
Fair Market Value
How would you determine the fair market value of Bitcoin? “It can get a bit tricky as the value of Bitcoin jumps and dips constantly and those changes can be quite drastic at times,” emailed David Hryck, a tax lawyer, and partner at Reed Smith in New York City. “You will have to convert the Bitcoin value to U.S. dollars as of the date each payment is made.”
In this world of anonymous payments, recordkeeping of your transactions might be a challenge. “Make sure you keep careful records of the dates and value,” Hryck said.
If a company or individual pays you in Bitcoins for services you performed as an independent contractor, you might wonder if it constitutes self-employment income.
According to the IRS, self-employment income includes all gross income from any trade or business you engage in, other than as an employee. The fair market value of Bitcoins you receive for your services (measured in U.S. dollars as of the date you receive payment) is self-employment income and consequently is subject to self-employment tax.
Reporting to the IRS
You might wonder how to report your Bitcoin or other cryptocurrency transactions on your annual tax return.
The basic tax rules that are applicable to property transactions apply to transactions using virtual currency. The IRS has made it clear that Bitcoin is a type of property and your transactions must be reported.
Failure to Report
What will happen if you skip reporting your Bitcoin or other digital currency transactions on your tax returns? Will the IRS know?
The fact that in 2014 the IRS issued a comprehensive notice including a Q&A section shows that the IRS is well aware that Bitcoin and other cryptocurrency transactions are more than a passing fad. As with any tax law or IRS rules, you assume certain risks if you fail to comply.
Valerie Rind first from TaxAct
Bitcoin has always been one of the more volatile topics of discussion. That is partly because of a lack of understanding of how it operates, its benefits, weaknesses and how to overcome them. Even so, it is impossible to quell everyone’s doubts when it comes to cryptocurrency, and especially Bitcoin.
One of the most controversial points of focus for Bitcoin is its security. Overall, the majority of people agree that Bitcoin offers significant protection and privacy. Unfortunately, due to the solidity of its security, there are those who claim that the protection provided is absolute – a statement that is very misleading. In truth, even Bitcoin has its shortcomings when it comes to security. Through this article, we have explored the ins and outs of Bitcoin security.
Although the blockchain is said to be hack-proof, the same cannot be said for user accounts. To use Bitcoin, you need an account, and for that, you need to register for a Bitcoin wallet. Each wallet is tied to a Bitcoin address, which is what is used to identify an account. This is a potential vulnerability.
Additionally, every Bitcoin wallet has a private key, which is used to access the wallet. Without the private key, it would be impossible to access one’s account. That is why hackers often tend to target the account holder. If a hacker takes over your private key, then you lose your account and your Bitcoin. This is why the wallet and private key are considered to be Bitcoin’s most significant weaknesses. So, what steps can one take to overcome such shortcomings?
Solutions to Bitcoin's security shortcomings
Cybersecurity lies at the root of the problem and can very well be the best solution. Although Bitcoin is said to be anonymous, it is still possible to trace a Bitcoin address back to you. The easiest way is by taking advantage of one’s IP address and using it to identify the device and location of the owner.
However, with that in mind, you can use a VPN to hide your IP address, assign a different IP address to your devices and encrypt your network traffic. To increase the effect of the VPN even further, you should use Tor over VPN, which reinforces the privacy, security, and anonymity afforded by both Tor and VPN.
Besides that, you should install an antivirus to scan your device and eliminate malware. Malware can be used by hackers to gather or manipulate information on your device. For instance, keyloggers can be used to track and record your keystrokes, thereby gathering information about your private key.
Protect your private key
Hackers often target your private key, so protecting your key already mitigates security risks significantly. Ideally, you should store the private key in an encrypted digital folder from where you can use the convenience of copy and paste. Doing so allows you the convenience of not having to type in the characters, which reduces the risk of theft of your private key through keyloggers.
Obscure your transactions
From a logical standpoint, if a hacker doesn’t have your address, then they can’t put in the effort to steal your private key. Unfortunately, hackers use numerous means to gather Bitcoin addresses such as stealing information from trade websites. That is why it is essential to obscure your transactions. There are various ways to hide your Bitcoin transactions, and the choice ultimately depends on your circumstances. For instance, you could use an online wallet, which doesn’t assign an address to every user. In case you already have an address, then you could exchange your Bitcoin with someone you trust and use your traded funds for your transactions, although this lowers the security.
Additionally, you might consider Altcoin and Coinjoin. The former provides a way to exchange your Bitcoin for Fiat currency securely, while the latter allows you to join hands with multiple other Bitcoin users and pull your resources together for your transactions. By pooling your resources together with various parties, a hacker cannot tell one transaction from the other.
Bitcoin provides users with a numerous security advantage. However, you shouldn’t assume that there are no weaknesses in Bitcoin security. Nevertheless, with a clear understanding of these shortcomings, it is easy to prepare effective countermeasures. With the countermeasures in place, Bitcoin becomes one of the most secure financial options available.
- Jeff Anderson
If you're reading this on this website, you're undoubtedly aware that bitcoin has been in a rough patch. The cryptocurrency has struggled for much of 2018, which is particularly disappointing to some proponents and investors following its late-2017 takeoff. Many are still of the belief that bitcoin will climb toward the end of the year, but at this point that doesn't seem the case. It's always been a difficult market to predict. Given that we know how a bullish bitcoin market can look however, it's interesting to think about what might be holding it back from more sustained strength. And as a point of interest, PayPal feels relevant in this conversation.
Incidentally, former PayPal CEO Bill Harris recently had some harsh words for bitcoin and cryptocurrency in general, stating that it's useless as a payment mechanism and ridiculous as a store of value. There are plenty of crypto critics who will quickly agree with Harris, and he may be proven right in the long-term. His comments clash with the actual value of bitcoin, even now, however, and invite comparisons with PayPal. In this case, we're wondering - would bitcoin be more useful as a payment mechanism or less "ridiculous" as a store of value specifically if PayPal weren't in its way?
The clear benefit would be in retail. We think of bitcoin in fairly complex terms at this point, and the more we consider cryptocurrency in general the more complicated the picture gets. In a very fundamental way though, these currencies were created to provide an easy and reliable means of digital payment. Unfortunately, that's what PayPal has already done for a long time. Naturally there are plenty of other differences between the two methods, but this is where serious bitcoin proponents sometimes have a hard time putting themselves in the shoes of beginners. For a lot of people, they're essentially two competing means of making digital payments - and PayPal has almost all of the retail utility on its side. Were it not an option, bitcoin could conceivably expand further into more useful retail areas, with more people tempted to adopt it to make online finances more convenient.
On a similar note, there's something to be said for the online gaming and casino business. Serving tens of millions of customers across international borders, this is a huge industry, and one in which lots of gaming platforms now accept PayPal transactions for deposits. As it happens, a few platforms - typically smaller ones - have also started accepting bitcoin and other cryptocurrencies. And as with retail this only makes one wonder what would happen if PayPal hadn't gotten there first. Without PayPal's availability at online gaming sites, there could be more demand for bitcoin, and thus more adoption.
Another space that's emerging as something of a battlefield between payment processing and alternative currency is alternative banking. PayPal is leading the way in a race of processors determined to offer traditional banking services, encouraging people to take their finances into their own hands. Things like direct deposit, debit cards, and more help PayPal to more or less replace personal banks in a lot of cases - which isn't in direct conflict with bitcoin, but which does theoretically negate some of its utility. Because it's billed as an alternative to fiat currency, cryptocurrency itself can function as something of an answer to those who would prefer not to be at the mercy of their banks. With PayPal and some of its counterparts already providing outlets for this though, bitcoin isn't exactly in first place as a choice for people who want to detach from banks.
This is not to say that bitcoin would automatically thrive without popular payment processors. It does seem however that PayPal is at least partially blocking its growth in a few areas.
Bitcoin has seen a small 0.5% price decline over the past 24 hours of trading. The cryptocurrency is currently exchanging hands on exchanges at a price of $6435 after seeing a 10% price decrease over the past 7 trading days.
The Bitcoin market looked like it may be recovering in August, however after meeting resistance at the upper boundary of the long term descending wedge pattern we have been following, the market rolled over and reversed once again.
Since the high of $408 million in May the entire total market cap for all cryptocurrencies has fallen by a dramatic $204 million to where it is trading today around $204 million as seen in the chart below.
Bitcoin still currently holds its number one position in terms of overall market cap across the entire industry. It currently has a market cap value of over $111 billion after the 64 month old coin suffered a 12.30% price decrease over the past 90 trading days.
Let us continue to remind ourselves of the long term descending triangle wedge and then analyse price action much closer to highlight any potential support and resistance areas.
BTC/USD - LONG TERM - DAILY CHART
Analysing the market from the long term time horizon above, we can clearly see the descending wedge formation on the chart. The bottom of the wedge has been supported by the $6000 handle and we can see that each time the market had approached this area of demand, the market rebounded aggressively. The market has tested the bottom boundary of the technical pattern a total of 4 or 5 times over the course of the trading year.
Price action has also touched and reversed from the upper boundary of the technical pattern a total of 4 times also. Each time the market made an attempt to break above the upper boundary of the long term descending triangle we can see that resistance proved too overpowering as the market reversed.
Price action is currently trading marginally below the long term .786 Fibonacci Retracement priced at $6622 which has proven to be a significant area of resistance during the month of August 2018.
If the market continues to head further lower, we can expect the identified price level at the $6000 handle to provide significant support moving forward.
Let us continue to analyse price action much closer to highlight any potential support and resistance areas.
BTC/USD - SHORT TERM - DAILY CHART
Analysing the market from the benefit of a closer time period such as the one displayed above, we can see clearly how the market has recently reversed from the upper boundary of the descending wedge pattern.
Price action had experienced a significant bullish run throughout July 2018 as the market started from a price low of $5850 on the 29th of June 2018 and extended to an intermediary high priced at $8506 on the 2th of July 2018. This was a price increase totalling 47% from low to high.
We can see that after placing this high and meeting resistance at the upper boundary of the descending triangle, price action rolled over and began to drop aggressively. We can see that the market had found support at the short term .886 Fibonacci Retracement level (drawn in red) priced at $6129. We can see that as the market approached this area the bears began to take their foot off of the pedal and began to slow down. This gave the bulls a change to regather their control and push price action higher from this level.
We can see that toward the end of August 2018, price action went on to create higher highs nice again and continue to rally until it had met further resistance at the upper boundary of the technical triangle/wedge pattern. We can see that as the market met this area of resistance in rolled over aggressively once again and began to drop.
We can see that price action has now found support at the previous .786 Fibonacci Retracement level priced at $6398. If the bearish pressure continues within the market and pushes price action below $6398 we expect immediate support to be located at the downside 1.414 Fibonacci Extension level priced at $6343. Further support located below this level will then come in at the .886 Fibonacci Retracement level priced at $6129.
If the market can continue even further lower we expect significant support to then be located around the psychological round number $6000 handle. Further support located below $6000 can be expected at the long term lower boundary of our descending wedge/triangle priced around $5824.
The technical indicators within the market are currently heavily leaning towards favouring the bears at this current moment in time. The RSI has recently penetrated below the 50 handle indicating that the bears have regained control within the market. IF the RSI remains below the 50 handle we can expect the market to continue to head further lower. For some gains to made within the market we would need to see the RSI break above the 50 handle and continue higher.
Similarly, the moving averages have recently started to show favour that leans toward the bears as the shorter moving averages have crossed back below the longer moving averages indicating that the bearish pressure is now increasing. The 7 day EMA (blue moving average) has crossed below the 21 day EMA (purple moving average) which signals are bearish crossover. If these moving averages continue to diverge away from one another we can expect the bearish pressure to continue to increase within the market.
Bitcoin adoption is a widely discussed topic which has many people looking at metrics like the number of Bitcoin transactions that the network has processed. However, the truth is that the majority of these transactions are just people using Bitcoin to buy and sell altcoins. In fact, being a gateway to altcoins is arguably one of Bitcoin’s main functions right now. However, we must remember the goals of Bitcoin creator, Satoshi Nakamoto, and his vision for the cryptocurrency. In a nutshell, Bitcoin was always intended to be used as peer to peer cash that didn’t go through a traditional financial institution.
In reality, the majority of Bitcoin transactions are simply people using centralized exchanges to buy other cryptocurrencies. This was not Bitcoin’s intended purpose. Yes, it can be argued that this is adoption, but is it the sort of adoption that will lead to Bitcoin becoming a true peer to peer cash? We think not.
Instead, true adoption happens in the real world with people actually using Bitcoin as a medium of exchange and a store of value. Right now in the West, the majority of Bitcoin owners are either idealists who share the vision, Satoshi himself or speculators looking for Bitcoin to rise in value. There is nothing wrong with speculating on Bitcoin, however, this is not true adoption and these people are simply using Bitcoin as a vehicle for short term profit.What Will Make Countries Adopt Bitcoin?
In developed countries, there is little incentive to adopt Bitcoin as a peer to peer cash. Of course, there are people who wish to adopt because of the tech and the ideology. However, there is no real pressing need. This is because fiat currencies in these countries are still relatively stable and function adequately.
However, there are countries in the world where fiat currencies are in crisis. Argentina is in financial turmoil, Syria is on the cusp of hyperinflation and Venezuela is experiencing some of the worst hyperinflation ever seen. These fiat currency crises provide an opportunity for Bitcoin to step in and offer whole nations the choice of an alternative currency system.
Countries experiencing financial crisis all have one thing in common: They are typically developing countries. They also generally have very low GDP per capita scores with most people having little in terms of savings and a high proportion of the population being unbanked.
To put it in perspective, the majority of people in Venezuela are living off a dollar per day or less. The reason is that the government and the Venezuelan banks imposed ATM withdrawal limits of just $1 per day. Now consider the position of the unbanked population holding fiat currency in an economy expected to reach one million percent inflation in 2018.
Bitcoin actually allows people to become their own bank and take custody of their own funds. This means there is no centralized organization there to say they can only access $1 a day. They instead have the freedom to access any amount of funds whenever they wish. Even though Bitcoin is volatile, it’s nowhere near as volatile as the Venezuelan Bolívar. This means that people's purchasing power is protected better than holding local currency. These are the conditions in which Bitcoin should theoretically be adopted at scale.The Problems Surrounding Adoption
The key characteristic of developing countries is that the local infrastructure is usually quite poor. People simply don’t have the money to be able to own laptops and desktops. However, almost everyone has a mobile phone. This means that if mobile data is within reach of the masses, then so is the ability to own and use Bitcoin.
The other side of the coin is that actually buying Bitcoin usually requires a bank account to make that Bitcoin purchase. As the majority of people in developing countries do not have one, this acts as a roadblock to adoption. That’s when peer to peer exchange of local currencies to Bitcoin comes in and LocalBitcoins is one such service. Adoption is of course bottlenecked by the availability of Bitcoins on the ground. However, this should improve over time. Quite simply if there is massive demand for an asset in a specific country, humans usually find a way to satisfy that demand.What Do The Trading Volume Numbers Tell Us?
The difficulty is finding data sets that are broken down by country and for platforms that allow a peer to peer exchange of digital currencies on the ground, without the use of a bank account. Localbitcoins trading data gives us exactly that. It should be noted that Bitcoin purchases will be happening through other means. However, when it comes to true adoption we are mainly concerned with the overall trend.Caption: Click here to view raw data.Incredibly, Venezuela has the fourth highest trading volume of any country in the dataset. You must appreciate that the total value of the local currency in the country is significantly lower than countries like the UK. This means that there are higher adoption rates in the country. Even when it comes to metrics like GDP or GDP per capita, Venezuela scores exceptionally low compared to the other countries with high Bitcoin trading volumes in the data. ConclusionThere is little doubt that Bitcoin adoption is growing in countries like Venezuela. This seems to support the idea that the countries most likely to truly adopt Bitcoin as peer to peer cash, are those experiencing a financial crisis.The underlying problems that caused the 2008 financial crisis have not been solved and Venezuela will not be the last country to experience an economic crisis. Whilst more economically developed countries are better equipped to weather the storm, they are not immune to pressure on their own fiat currencies. As this pressure grows, so does the incentive for cryptocurrency adoption.
Bitcoin Analysis: Price Action Finds Support at the .382 Fibonacci Retracement; Can the Bulls Pick Up Steam From Here?
Bitcoin has suffered a small 0.05% decline over the past 24 hours of trading. This isn’t much considering the bullish run we had just experienced. The number 1 ranked crypto giant is currently being traded at $7,592 after experiencing a 7.26% drop over the past 7 trading days.
Bitcoin has had an eventful month during July as prices have risen 15.68% over the past 30 trading days. This has been partly due to the anticipation of the SEC allowing the Winklevoss Twins ETF proposal to go ahead. However, it was rejected with much debate amongst the SEC chairman who voiced her descent against the verdict. The chairman stated that she would like to not hinder the growth of an innovative technology but the rest of the board claimed the technology was still too primitive.
However, as each rejection passes we come closer and closer to an approval of an ETF which would allow serious investors to seriously consider investing into the Bitcoin asset through the ETF.
Bitcoin is currently ranked at pole position in terms of rankings across the entire industry. It currently has a market cap totalling $167 billion. However, this is $37 billion lower than the market cap high witnessed 3 months ago on May 5th 2018, as indicated in the graph below.
Let us continue to analyse price action over the long term for Bitcoin.
BTC/USD - LONG TERM - DAILY CHART
Analysing the market from the long term perspective above, we can see that Bitcoin had experienced a serious bullish run as price action started from a low of $2980 on 15th September 2017 and extended to an all time high priced at $19,891 on December 17th 2018. This was a price increase totalling 545% from low to high.
After placing the all time high, the market continued to roll over and initially found support at the .618 Fibonacci Retracement priced at $9463. This is a Fibonacci Retracement measured from the entire bullish run aforementioned. However, the market was not able to hold this level and proceeded to drop below the 100 day moving average, falling until it found support at teh .786 Fibonacci Retracement during February, priced at $6622.
We can see that for the majority of the year, price action was trading within the confines of the descending triangle highlighted above. The base of the triangle was denoted at the blue line priced at $5783 and the upper boundary acts as a falling resistance line. The market had recently broken above the upper boundary of this descending triangle as it pushed itself above the 100 day moving average.
This break above the descending triangle could signal a potential long term trend reversal, however, it is still far too early to come to this conclusion. For a confirmation that the trend truly has reversed from bearish to bullish we will be waiting until the market breaks above and completely clears the $10,000 handle.
Let us analyse price action a little closer over the short term to highlight any potential support and resistance zones.
BTC/USD - SHORT TERM - DAILY CHART
Analysing the market from a short term perspective, we can see that during May and June price action was declining from a high starting at $9964 on the 6th of May and fell to a low of $5790 on 29th of June. This low was strongly supported by the lower boundary of the long term descending triangle outlined in the previous section.
We can see that as July started trading the moving average crossed over one another (as mentioned in our previous BTC analysis article) and the market proceeded to start a small bullish run. We can see that price action started from a low of $5780 on the 29th of June and extended to a high of $8506 on the 24th of July. This was a price increase totalling 47% from low to high.
The market had hit resistance at the bearish .618 Fibonacci Retracement level (drawn in black) priced at $8371 and reversed. This is a Fibonacci Retracement measured from the bearish decline starting in May and ending in June. We can see that this area of resistance was bolstered due to a confluence of a 1.414 Fibonacci Extension level priced at $8290.
The market has since retraced slightly, finding support at the short term .382 Fibonacci Retracement (drawn in red) priced at $7460. This short term Fibonacci Retracement is measured from the bullish run starting from June 29th and ending at July 24th. We must also be aware that this support zone is significantly re-enforced by a 100 day moving average which is hovering in the same area.
If the bearish momentum continues and pushes the market below $7460, we expect the nearest level of support to come in at the short term .618 Fibonacci Retracement priced at $6822. This would most likely bring trading action back into the confines of the previous descending triangle.
Alternatively, if the short term .382 Fibonacci Retracement proves to provide a solid foundation of support, we expect near term resistance to be immediately located at the bearish .618 Fibonacci Retracement (drawn in black) priced at $8371. If the market can continue further above this level the next level of anticipated resistance lies at the 1.618 Fibonacci Extension level priced at $8656 followed by the bearish .786 Fibonacci Retracement priced at $9078.
The technical indicators within the market have recently shifted toward favouring the bears. The RSI is trading marginally below the 50 handle, indicating the recent bearish pressure over the past 5 trading days. If we are to expect the bullish run to continue, we would need to see the RSI cross back above the 50 handle.
However, the moving averages are still favouring the bulls at this moment in time. The 7 day EMA is still trading above the 21 day EMA which is still trading marginally above the 100 day SMA. However, the 7 day EMA (blue line) is pointing in a steep downward direction indicating that the bearish momentum over the recent few days is picking up. So long as the 7 day EMA does not cross below the 21 day EMA (purple line) we can still expect the market to continue its recent bullish run.
Bitcoin is set to complete its first 2 consecutive bullish weeks of price action in over 2 months, this week as the market enjoys an appreciation of 8.11% over the past 7 trading days. At the time of writing, Bitcoin is trading around $6750, recently breaking above the $6,800 barrier before falling again. Bitcoin has seen a price increase of 3.70% in the past 24 hours trading alone.
This second consecutive bullish week will be extremely important to long term Bitcoin holders who have suffered a year of sustained losses and this may provide hope that the bearish decline may soon be over.
Bitcoin is currently the reigning cryptocurrency ranking in at number one in terms of overall market cap value across the entire industry, with a total market value of $117 billion. This is a significant $51 billion lower than the market cap high of $168 billion seen not two months ago on the 5th of May as indicated by the graph below.
Although this price increase could serve as a signal for a potential long term reversal, it is important not to get over excited and to wait for more confirmations before committing to any significant positions.Let us analyse market price action over the long term and assess its performance.
BTC/USD - LONG TERM - DAILY CHART
Analysing the market from a long term perspective, we can see that price action had experienced a major bullish run toward the final months of 2017, rising from a low of $2980 on the 15th of September 2017 to an all time high of $19,891 on the 17th of December 2017. This was an epic price increase of over 550% from low to high.
After placing this all time high, price action went on to depreciate throughout the year of 2018, originally finding support, in February, at the .786 Fibonacci Retracement priced at $6622. This is a Fibonacci Retracement taken from the epic bullish run described above. The market went on to retest this .786 Fibonacci Retracement again during April and June before breaking below this level in June.
We can also see that, before price action broke below the .786 Fibonacci Retracement, the market was trading within the confines of a descending triangle, the .786 Fibonacci Retracement effectively acted as the lower boundary of the triangle. As the market dipped below the descending triangle, it fell until it found support at $5783. This was the low day close price seen in November, highlighted by a blue horizontal line.
Price action rebounded as it hit this blue level, reversing to where it is currently trading once again at the .786 Fibonacci Retracement priced at $6622.
Let us continue to analyse price action over the shorter term closer to find some likely areas of support and resistance.
BTC/USD - SHORT TERM - DAILY CHART
Analysing the market from a closer perspective, we can see that price action rose from a low of $6425 on the 1st of April to a high of $990 on the 5th of May. This was a price increase of 55% from low to high.
Price action then went on to degrade, falling below the starting price point of the April bullish run and consequently falling below the flow of the descending triangle. We can see how price action fell all the way to the November low day day close highlighted by the blue line before aggressively rebounding. It is also important to note that this support area is bolstered by a 1.414 Fibonacci Extension level, taken from the entire bearish swing leg seen in April, priced at $5847.
Price action bounced and managed to battle back above the .786 Fibonacci Retracement where it currently finds support. If the bullish momentum can continue, the nearest level of resistance will come at the bearish .382 FibonaccI Retracement priced at $7380. This is a Fibonacci Retracement taken from the bearish decline witnessed during May and June, starting from a high of $9,990 on the 5th of May, extending lower to a price of $5,755 experienced on the 24th of June. This was a price decline of 42% from high to low.
If the bullish momentum can continue, further resistance will be found at the 100 day moving average (black line) followed by the upper boundary of the descending triangle. If the market can break above the descending triangle and clear the bearish .618 Fibonacci Retracement level at $8375 we could consider that the market has reversed into a bullish market.
Alternatively, if the bearish pressure within the market re-enters over the next few days the first area of support is expected at the blue line priced at $5783. If the bearish momentum pushes the market further lower, support can be expected at the long term .886 Fibonacci Retracement (highlighted in red) priced at $4931.
As July started trading the technical indicators began to swing into the direction that favours the bulls within the market. The RSI had battled its way up from oversold conditions at the 20 handle in mid-June and above the 50 handle. This indicates that the bullish momentum within the market is growing and that the bearish momentum has subsided. If the RSI can continue to remain above the 50 handle, we can continue to expect the bullish momentum to continue.
SImilarly, the moving averages are providing strong favour toward the bulls within the market. The 7 day EMA (blue line) and the 21 day EMA (purple line) have crossed up above one another for the first time in over 2 and a half months. If the 7 day EMA can continue to move away from the 21 day EMA this will indicate that the bullish pressure within the market is increasing.
It is extremely easy to get overly excited within the crypto markets when price action posts a couple days of green momentum. However, in the case of Bitcoin we need to continue to remain disciplined and wait for confirmations that the trend has indeed reversed. A break to the upside of th descending triangle could suffice as an initial confirmation that the market is in the process of a reversal.
Over the past week, Bitcoin has been struggling against the dollar as it falls far below $7,000. However, throughout the course of the week the cryptocurrency giant has found support and price action is currently trying to make a recovery as prices rise by 3.10% over the past 24 hours as Bitcoin trades hands around $6730.
We saw cryptocurrency markets sink significantly last week as the total market capitalisation of all coins fell from $340 billion on the 9th of June to a low of $265 billion experienced on the 13th of June. This was a significant $75 billion market wipe out in a matter of just a few days.
Since the low, market cap has found some support as it continued to trade sideways for the past few days until a small break out was seen recently as the market cap currently sits at $289 billion.
One more interesting thing to note that has occurred during the past week is the recent rise of Bitcoin dominance back above 40%. This is beginning to show that Bitcoin is starting to regain some of the dominance lost as it outpaces growth relative to other altcoins.
The graph below shows us the market capitalisation of the top altcoins by percentage over the past year. We can see that during the 2017/2018 altcoin “boom” Bitcoin dominance fell a significant amount from a high of 64% on December 17th 2017 to a low of 33% on January the 4th 2018.
Let us examine Bitcoins price action over the long term and analyse the market.
Looking at the market over the long term, we can see that Bitcoin was trading within the confines of a descending triangle for a period of 6 months before price broke below.
Price action had started the year by putting a high in at $17,252 before the market experienced a significant correction and fell to a low of $6,000 set in early February. Since then, the market had traded in a period of consolidation as price action traded it’s way through the triangle.
Over the next month, we could see price action making a retest at $8,000 if Bitcoin can remain above $6,200 throughout the next few days of trading. Alternatively, the nearest level of support seen below $6,200 is at the $6,000 price handle. If price action manages to break below $6,000 then June and July will turn into very bloody months for the entire cryptocurrency market.
Bitcoin dipped below the triangle during the market wipe out which started last Sunday on the 10th of June. However, we can see that price action has recently found it’s way back within the confines of the triangle once again. One interesting thing to note is that price action has not yet broken below the descending triangle on the BTC/GBP charts as seen below:
BTC/GBP - LONG TERM - DAILY CHART
Looking at the BTC/GBP above, we can see that Bitcoin has not broken below the long term descending triangle. Instead, price action has found support on the lower boundary of the triangle and has since bounced from this support level.
This should provide some more validation that the potential long term descending triangle described in the US Dollar chart previously, is still in play if BTC/USD can break back above into the triangle.
Let us examine price action for BTC/USD over the more recent term a little closer
BTC/USD - SHORT TERM - DAILY CHARTS
Looking at market action over the more recent months, we can see that the recent bearish action has been an extension of the declines witnessed in the previous month. Since early May, price action has fallen from a high close to $10,000 to a low close to $6,000 recently experienced last week.
We can see that price action has found some form of support at the downside 1.272 Fibonacci extension priced at $6,264. This is a Fibonacci extension taken from the entire bearish leg seen during May from high to low.
Price action has recently broke back into the descending triangle. If price action can close within the triangle today we could consider that this triangle may be back into long term play as validated from the BTC/GBP charts above. In this scenario, if Bitcoin can break above $7,000 then it is free to make an attempt at June’s high placed at $7,779.
Alternatively, if price action does not manage to close within the triangle and this bearish pressure continues, we could see prices take another test at recent support seen around $6,264. If price action continues lower the closes handles of support are located at $6,000 and then $5,847.
Over the past week the technical indicators have largely been favouring the bears, however, recent price action has begun to swing technical indicators towards the bulls. The RSI has spent most of the last week stuck in oversold conditions below 20. RSI has recently made its way closer to the 50 handle, if it can break above the 50 handle this would indicate that bullish momentum is starting to really increase within the market.
Price action has also recently broke above the 7 day EMA (blue line) indicating that price is currently trading above the average price taken over the past 7 days which could indicate to the bulls that the bears have started to lose steam within the market. If the 7 day EMA can eventually cross above the 21 day EMA (purple line) this would send signals to all bulls that a market shift may be occurring.
We have been following the development of this long term descending triangle for over half a year now. Recently analysts were startled as price action dipped below the triangle, worried that the worst case scenario was unfolding for Bitcoin.
However, the triangle is still strongly in play on the BTC/GBP charts indicating that it may still be valid if price action can re-enter the triangle on the BTC/USD market.
We will closely be watching momentum over the next few trading sessions to see if bulls can continue this short term run they have started.
The past week has seen some decent price action for the bulls as price had risen from a low of $7,040, on the 29th of May, to a a high of $7,779, set on the 3rd of June.The past week has seen some decent price action for the bulls as price had risen from a low of $7,040, on the 29th of May, to a a high of $7,779, set on the 3rd of June. However, the past two trading sessions have seen negative pressure from the bulls as price has fallen and is currently exchanging hands at $7,419, around a 5% reduction in price from the highs.
Over the past few weeks, there have been some traders that have noticed that the monthly cyclical price action of Bitcoin’s short-term trend has been reversing over the previous five months toward the start of each month. More specifically, since the month of January, Bitcoin has experienced a price reversal on the 6th day of each month as highlighted in the chart below.
The chart above shows the daily price of Bitcoin over the span of the current year. The start of the year is highlighted by the dashed yellow line toward the beginning of the chart. The start of each month is highlighted by a faint gray line and the 6th day of each month is indicated by the bold black vertical lines.
If you closely examine price action around the area of the 6th day of each month, you will see that a short term momentum shift occurs, as the market shifts in market trading conditions. For example, the month of January was, overall, a bearish month starting from the 6th of January. Then on the 6th of February the market shifted in trading conditions from bearish to bullish and remained bullish all up until the 6th of March where the market experienced another reversal and switched from bullish to bearish.
As the 6th of the month approaches, can price action continue to make significant reversals on the 6th day of every month?Let us examine price action over the past few months and see how likely it is that this reversal might occur.
BTC/USD PRICE ANALYSIS
LONG TERM – DAILY CHART
From a long term perspective, the Bitcoin market has been consolidating within the confines of a symmetrical triangle for the past five months. This means that, on a long term technical basis, the market is neither bullish nor bearish.
Looking at the chart above, we can see that each price reversal that has occured since the 6th of February, has occured on the 6th of the month on either the upper boundary of the symmetrical triangle or the lower boundary of the triangle.
For this market to be considered a bullish market we would need to see price break and hold above the symmetrical triangle before making attempts at the highs set in early May at a price of $9,990.
As the 6th of June rapidly approached could price action follow this recent pattern in reversals?
SHORT TERM – DAILY CHART
Looking at the chart above, we can see that over the past few days Bitcoin had made a small attempt at a recovery but the bulls had ran into resistance close to the .618 Fibonacci Retracement at price $7,836. Since this price has started to retrace lower back toward previous support located at $7,251.
For the 6th day theory, including the reversal occurring at the symmetrical triangle, to hold true, we would need to see price action to reduce by around 5% from current prices, either today or tomorrow, to reach the lower boundary of the symmetrical triangle. Due to the low volume and momentum,this would be a difficult task for price action to fall within such a short space of time.
However, for the original 6th day theory to hold firm without the added confirmation from the technical triangle pattern, price action would just have to make a reversal at the current levels on the 6th of June. If price action manages to reverse on the 6th then we could expect to experience a solid month of gains during the month of June.
The technical indicators are not providing much confidence for the 6th day reversal theory on a daily time frame. RSI is currently trading below the 50 handle indicating the short-term bearish momentum within the market. For a reversal to occur we would need to see RSI battle it’s way up above and hold above 50. To add to this lack of confidence, the 7-day EMA and 21-day EMA are pointing in the downward direction and show no indication that they are ready to pull closer to one another in the short-term.
SHORT TERM – 4-Hr CHART
Taking an even deeper dive into price action, we can see that Bitcoin may actually be showing some short term signs that this 6th day price reversal theory may show some merit.
We can see that price action has retraced up until a short term .50 Fibonacci Retracement level at a price of $7,408. This is a Fibonacci taken from the short term bullish swing from a low seen on the 29th of May to the high seen earlier this month. At the .50 Fibonacci Retracement, price action has managed to find some support and have shown positive signs of reversing. More specifically, price action has managed to show positive signs that the reversal may indeed happen, once again, on the 6th of the month.
The technical indicators, on the 4-hour basis, also aid to the fact that a reversal may occur on the 6th. RSI over the past trading session had reached oversold conditions and has began to show signs of reversing as it makes its way up above 50. If RSI can break above 50 over the next couple of trading sessions then we will be experiencing a price reversal within the market.
CONCLUSIONSAs traders, we find technical patterns and make trading decisions based off of the validity of these trading patterns confluencing with one another.
The 6th day theory has shown some merits of validity over the past few months. However, it is important to note that past history of sentiment is not indicative of future sentiment. Meaning that just because a price reversal has happened on the 6th previously, does not mean that it will happen every month on the 6th. It is important for traders to let price action be the deciding factor when beginning to execute on any trade.
It is also important to note that price action has been showing indicators for a potential reversal over the past few weeks now. The reversal seems to be imminent but will it happen on the 6th of June? The good news for traders is that even if it does not occur on the 6th, it will occur over the following few days.
The 6th of the month approaches tomorrow, where we will see if this theory continues to hold its validity.
– Yasin Sheikh
Bitcoin has started the month of June in a bullish manner as prices began to reverse toward the end of last month. We are currently trading 10% higher from May’s lows, set last week, at a price of $7,715 (at the time of writing). This is a good start to the month but how much further does Bitcoin have to travel to reach McAfee’s lofty prediction?
On May 24th John McAfee, the mastermind behind the self named multi-decade old anti-virus software, posted the following tweet in which he made the prediction that Bitcoin would surge past a price of $15,000 within the month of June.
My short term price predictions: in a major dip, with nearly everything dropping, the price of Docademic doubled since my prediction. The market will turn before June 12th and my predictions will hit. My algorithms predicted Trump's June 12th date. They have never been wrong. pic.twitter.com/IGAzWPtOV4— John McAfee (@officialmcafee) May 24, 2018
June has started on a promising note for McAfee’s prediction but how far away are we from reaching $15,000 within the month of June?
At the time of writing, Bitcoin is currently trading at a price of $7715. The market would have to experience almost a 95% price increase for Bitcoin to trade at a price of $15,000 before the end of June. A move of this magnitude would require Bitcoin to go on an incredibly bullish run in the couple of weeks ahead.
For perspective, the chart below shows current price and how far Bitcoin would need to travel before arriving at the $15,000 mark.
As you can see, price action would need to begin an incredible bullish run to reach anywhere near $15,000 before the end of the month. The $15,000 is marked in red, the vertical dashed yellow line shows the start of the year and each individual month is highlighted by the vertical grey lines.
The last time price action had witnessed the $15,000 level was on the 9th of January, earlier in the year. A single month bullish run that restored over 4 months of bearish pressure would require significant momentum to be possible.
Although we do not rule out any bullish possibility within the Bitcoin market, the chances of McAfee’s prediction coming true within the month of June are slim at best. Let us take a close look into the past years price action and see what may be possible for the month ahead.
BTC/USD PRICE ANALYSIS
LONG TERM – DAILY CHART
From a long term perspective, Bitcoin is neither in a bullish nor a bearish market. Instead, Bitcoin has elected to trade within the bounds of a consolidating market. More specifically, Bitcoin has been trading within the confines of the symmetrical triangle highlighted in the chart above.
Price action has been trading within this triangle for close to 5 months and is quickly approaching the apex of the triangle. Typically, symmetrical triangles resolve themselves toward the upside so a resolution of this triangle would mean a bullish run for Bitcoin.
For price to be considered to be a bullish market we would first need to see a break of the upper resistance line of the triangle. Price action would then need to break and close above the high set in May at a price of $9,990 to be considered bullish.
If price action would break below the lower support level of the triangle then we could consider Bitcoin to be heading into a bearish market as price would go on to test the lows set out in April at a price of $6,425.
SHORT TERM – DAILY CHART
We can see that May was a rough month for Bitcoin as price fell up to 29% from the high of $9,990 to the low of $7,040. Price had retraced slightly further than the .786 Fibonacci Retracement, taken from the bullish swing experienced in April, as it found support on the lower support boundary of the triangle. Since then, price action has experienced a short term rebound and is showing signs of a promising few weeks as the month begins.
Price is currently experiencing resistance at the .618 Fibonacci Retracement level, if price can break and hold above this level then we could see price continue to rally up towards the upper resistance boundary of the symmetrical triangle. From there, we could see if price action would manage to break our long term triangle and make its move toward McAfee’s prediction (unlikely to occur in June).
The technical indicators are also beginning to show signs of positivity for Bitcoins bulls. The RSI has recently managed to break above the 50 level indicating that bullish momentum within the market is growing. We will be following RSI closely over the next few trading sessions to see if it can maintain a level above 50. The 7-day EMA and 21-day EMA are also showing positive signs for the Bulls as they make their way toward one another. If both of the EMA’s would then go on to cross one another then this would serve as a bullish signal.
Bitcoin markets are extremely unpredictable. Prices can fluctuate wildly on a very short term basis. The only thing we can do as traders is to wait patiently and make trading decisions based off of previous price action.
McAfee’s prediction is an extremely generous prediction for Bitcoin’s bulls. However, a price increase to $15,000 before the end of the month is a difficult task for price action to achieve. Such a significant bullish move would require a great deal of momentum within the market. The momentum is growing, but not in the way that would merit a move to $15,000 before the end of the month.
We would hope that Bitcoin could continue its bullish momentum throughout the following trading sessions this week. If the bullish momentum can continue during the month then we would consider a break of the upper boundary of the long-term symmetrical triangle a significant victory for the bulls within the market by the end of the month.
– Yasin Sheikh
Warren Buffet, the famous entrepreneur, spoke his mind about Bitcoin investing for Yahoo news on Saturday. He does not consider cryptocurrency to be an investment, and he further explained: "There’s two kinds of items that people buy and think they’re investing,” he says. “One really is investing and the other isn’t." Bitcoin, he says, isn’t. “If you buy something like a farm, an apartment house, or an interest in a business… You can do that on a private basis… And it’s a perfectly satisfactory investment. You look at the investment itself to deliver the return to you. Now, if you buy something like bitcoin or some cryptocurrency, you don’t really have anything that has produced anything. You’re just hoping the next guy pays more. You aren’t investing when you do that. You’re speculating. There’s nothing wrong with it. If you wanna gamble somebody else will come along and pay more money tomorrow, that’s one kind of game. That is not investing.”