On BitStamp, we saw very significant depreciation which took place on significant volume. This looks like a potential game changer. But is it? We offer our opinion. First, recall our recent comments:

Since our previous alert was posted we haven’t seen much depreciation. In fact, what we have seen looks like a period of weak back and forth trading. What is actually most interesting, is the fact that all of this movement has taken place very close to the 38.2% Fibonacci retracement level around $14,276. So far, the situation is such that we saw a couple closes below this level which suggests that the short-term outlook might be more bearish than bullish. At the same time, at the moment of writing this words (...), the price of Bitcoin is almost precisely at this level, having moved up. This means that, even though the situation is still more bearish, the outlook is clouded by the possibility of a move above the retracement.

If the situation was a bit unclear previously, it seems much clearer right now. The move below the 38.2% Fibonacci retracement level at $14,276 is now confirmed and we might even get a confirmation in time of the move below the 50% retracement at $12,611. These are extremely bearish developments, possibly game-changing.

On the long-term Bitfinex chart, the previous appreciation looks like a dead cat bounce. The points mentioned above seem to confirm it. In our previous alert, we wrote:

The situation now is just as tense as it was at the time our previous alert was published if not tenser. It would be easy to proclaim that the move up has ended or that the currency definitely has to move down. We don’t want to make such bold statements in light of the current cloudy situation. The pattern seen on the long-term chart suggests that we might have seen a very important top below $20,000, sharp depreciation and then a bounce to $17,000.

This might imply that bitcoin will be open to decline more substantially. The 38.2% retracement level might be the final barrier before the move. Since the move below the retracement is tenuous, we think it best to wait for the situation to clarify before considering hypothetical shorts.

In light of this, the 38.2% retracement indeed turned out to be the trigger for the move. And the move was actually a drop off a cliff. At the moment of writing, bitcoin is even below the 50% retracement. In the current environment, the medium-term situation has changed to bearish and we would expect to see more declines in the next couple of months. The short-term situation is slightly less obvious as we might see a bounce to the upside. However, the risk of missing out on more declines seems too great at the moment, in our opinion. Waiting for a move up might seem advantageous but it might not be possible to enter positions when the next move begins.