Long

Bitcoin: Will History Repeat(ETH)?

Updated

On August 1st, the Bitcoin community will be deciding on the future of Bitcoin. Since there is a likely chance that a hard-fork will occur, I will attempt to go through what may happen based on what happened to Ethereum when it hard-forked into Ethereum and Ethereum classic. This analysis will be based primarily on fundamentals and what happened historically compared to my heavy technical-analysis on Ripple.

We begin during the period of the hard-fork of ETH and ETC which occurred on July 20th 2016. This is shown by the pink vertical line on the ETHUSD chart. It can be seen that the lead-up (one day before) into the hard-fork and also after the hard-fork did not affect the price of ETHUSD at all, where the up-trend in price continued. This pump in price is what I believe is happening currently to BTCUSD 1-year later (2017) over the past 2 days as seen in the below screenshot.

I would not be surprised that on the actual date of the actual hard-fork for BTC (August 1st) and a few days after, price could pump to 3013.47 (similar to the pump 1 year ago on ETCUSD chart), hitting the top of the ascending triangle where the previous high could not reach. However, on the 26th of July 2016 the price of ETHUSD entered a down-trend. This down-trend seems to have been delayed, where you would think that the down-trend should have began at the date of the hard-fork. However, what is notable on the 26th of July 2016(shown by the purple vertical line on ETHUSD) is that Kraken, a major crypto-currency exchange opened markets for ETC (blog.kraken.com/post/227/kraken-opens-classic-ether-etc-markets-and/). With these markets open by 27th July 2016 (shown by the orange vertical line on both charts) it explains the down-trend occurrence.

This, however, is not the most interesting observation I came across. From the opening of the ETC markets on Kraken until August 10th (shown by the green vertical line on both charts) price movement between ETHUSD and ETCUSD was almost perfectly negatively correlated (shown by the green curve lines and red trendlines on both charts). This implies that money flow into ETC primarily came from ETH. There would be two reasons why investors/market players would place their money from ETH into the new blockchain:
1. Speculative: As many believe that the new block-chain is better and thus its value will increase
2. Hedging: Risk-averse investors that want stability (maybe to use BTC to purchase goods and services) will place a portion of their funds into the new block-chain such that if case 1 is true, they will not miss out on the exposure (which i think is a good move, given how perfect the negative correlation is a fortnight from Kraken ETC markets opening)
These 2 reasons are also relevant one year later to BTC as it approaches its period of hard-forking. I believe money flow from BTC to BCH(Supposed new ticker if hard-fork occurs) will occur and we will see a decrease in the price of BTC to the base of the ascending triangle pattern around August 17th which by serendipity is about a fortnight from the hard-fork. If this occurs then history will have repeated itself.

We now reach the final part after August 10th 2016, where it can be seen that ETCUSD continues in a constant downtrend until the end of October. In contrast, ETHUSD continues to range by October's end. The market after August 10th can be assumed to be now valuing each of the new crypto-currencies separately and the correlation lowers. Again, looking back to today, I believe after the fortnight from the hard-fork, August 17th on-wards, we will see a proper valuation of the new bitcoin and this is an improved bitcoin thereby making logical sense to have a higher valuation. Hence, the ascending triangle after 17th August will be completed and an upwards breakout will occur.

Note

The below link is Kraken's announcement they will offer BCH markets but no date is specified only "after the fork":
blog.kraken.com/post/1150/bitcoin-cash-and-a-critical-alert-for-bitcoin-margin-traders/
I couldnt add this to the main body as I hit the word limit!
As always your feedback is welcome,
Thanks, TheTraderJ

TheTraderJ

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