Price analysis: Bitcoin continues to struggle

Trading
December 10, 2019

Fundamentals

It has been reported that another major Bitcoin mining farm is under construction in the United States. Crusoe Energy Systems, which converts natural gas to energy-intensive computing, announced it has successfully closed the latest fundraising round, worth $70 million. The Denver-based company has raised $30 million in equity funding and $40 million in project financing to be used for the expansion of its Digital Flare Mitigation services and technology. 

The financing round was led by the KCK Group and Upper 90, while Founders Fund, Winklevoss Capital and Polychain Capital also took part in the process. 

"Today's announcement paves the way for Crusoe to deliver the energy industry with a scalable solution for the natural gas flaring challenge and to execute our vision of a low-cost distributed computing cloud," said Chase Lochmiller, CEO and co-founder of Crusoe.

According to media reports, Crusoe plans to utilise about “10 million cubic feet a day of gas, which otherwise would have got wasted,” to power its Bitcoin mining farm.

“It’s a very creative way to solve an environmental and economic problem for the oil and gas industry,” said Alex Urdea, the chief investment officer of Upper90.

Bitcoin mining farms are receiving more attention from investors. Last month, Whinstone US, and Northern Bitcoin AG, from United States and Germany respectively, merged to install a 100-acre bitcoin mining farm in the U.S. state of Texas. The location of this farm comes as no surprise as Texas is known to offer its abundant power resources and cheap electricity prices.

“The stable and efficient energy resources in Texas are fundamental to the inevitable scale of growth for the cryptocurrency mining industry,” said recently Clinton Brown, project manager at Bitmain, which launched a new cryptocurrency mining farm in Rockdale, Texas, a few months ago. 

While the Rockdale farm currently operates at 50MW capacity, the company has the potential to  expand the farm to over 300MW capacity in the future, making it the world’s largest for Bitcoin mining. Bitmain already operates two other Bitcoin mining farms in the United States. 

It was also reported that the Danish court decided to uphold Nordea Bank’s ban on its 31,500 employees trading in Bitcoin. Previously, the Helsinki-based bank announced plans to ban its employees from owning cryptocurrency. The court justified its decision by citing the purported risks associated with cryptocurrencies.

Finally, Bloomberg released a list of the best performing cryptocurrencies of 2019. One of the key takeaway messages from the list is that eight out of ten biggest digital coins by market capitalisation failed to perform better than Bitcoin in 2019. These altcoins either depreciated in value or have appreciated much less than Bitcoin. The remaining member of the list is Binance Coin (BNB) which has surged about 150%.

Technicals

Last week also marked another historic milestone for Bitcoin. On December 04, traders moved a total of 1.3 million Bitcoin, worth nearly $9 billion, in a single hour. According to analysts, this is the highest hourly USD transaction volume in bitcoin's history.

Technically, Bitcoin has continued to consolidate around the $7500 handle. As reported above, December 04 saw Bitcoin hit the monthly high of $7772, however, the price rotated lower to finish in red on that particular day. This should serve as a warning to Bitcoin bulls that the bears are still in control.


BTC/USD daily chart (TradingView)
BTC/USD daily chart (TradingView)

On the upside, the first resistance is locked at $7750, the level which capped the price action on December 04. The second resistance level sits around the $8000 handle, where the 38.2% Fibonacci retracement of the latest move lower is located. The major horizontal resistance is located at $9000 (the upper blue line).

On the downside, the price action is supported by the 100-DMA, which is located near the $7300 mark. In addition, the six month low of $6515 will be seen as an important support if the 100-DMA gives way. The lowest blue line on the chart, below the $6000 handle, is another important support level.

The Bitcoin price action showed repetition of a pattern from last year when it declined during November just to form a moderate bounce in December. If this is the case once again, we may see BTC consolidating around the $8000 mark. 

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