As bitcoin’s price skyrocketed on Thursday May 25, one analyst predicted an imminent correction. The price of bitcoin soon fell sharply before reaching $2,800 as she predicted. She also gave some price forecasts, warning of a downturn for the rest of the year but record highs in 2018.
An analyst at Forex Analytix, Nicola Duke, uses a method called Fibonacci retracement to analyze the price of bitcoin as well as determine its support and resistance levels.
This popular technical analysis tool is based on the idea that markets will retrace a predictable portion of a move before continuing in the original direction. It looks at the peaks and troughs or rallies and falls of historical bitcoin prices in order to forecast future movements.
“According to Fibonacci analysis, the way bull markets typically work is that you’ll have a pullback that stops when it retraces a key percentage of a previous move higher,” CNBC explains, adding that these key percentages come from Fibonacci Ratios. Examples of key ratios which technical traders like to use are .618, .786, 1.27, 1.618, and 2.618.
Bitcoin’s Price Analysis
Duke’s Fibonacci retracement analysis chart, using Bitstamp weekly prices going back to 2013, was published on Tradingview.com on Thursday.
She indicated on the chart that $2,283 is the short-term trend support; another support level above that is $2,800. In addition, bitcoin has two major support levels below $2,283. They are $2,145 and the more likely $1750-80. Both are shown on her chart.
In an interview with CNBC on Thursday morning, Duke explained that “wave two” of bitcoin began in the fall of 2013. The price of bitcoin rallied sharply for several months before falling steadily. It bottomed out in January 2015, then began to climb again. Currently, bitcoin is in “wave three”, the publication relayed her findings:
$2,800 could be the level at which bitcoin begins its fall. The price is likely to hit $1,780, but could even fall as far as $1,470.
Duke expects this next wave, which is the fourth, to last 61.8 percent of how long wave two lasted. 61.8 percent is one of the key Fibonacci ratios.
She believes that the rally after the correction would start in January. “We will see the bottom at the start of January, that is when stock markets typically tend to have a correction as well,” she noted, then explained to CNBC that:
After that, there should be a sustained rally to $3,350 and then $4,480 in 2018.
What do you think of this Fibonacci retracement analysis? Let us know in the comments section below.
Images courtesy of Shutterstock, Twitter, Tradingview, and Nicola Duke
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Source: News Bitcoin