Bitcoin Cash (BCH), a cryptocurrency created by forking the blockchain network in August, surged about $150 last weekend to trade at $510 levels against the US dollar. The BCHUSD had recorded a high of $972 in mid-August. However, profit-booking saw the offshoot of Bitcoin lose much of its value earlier this month to record a low of $279.10. Now, the uptrend seen in the last few trading sessions was certainly exciting and has rekindled hopes of another big rally. However, as discussed below, the rally may not last for long and a downtrend can be expected soon.
As of date, nearly 50% of global volumes in BCH related pairs are centered around Bithumb, a South Korean cryptocurrency exchange. Coinone and Korbit are the other two major exchanges in which the BCHUSD pair is traded the most. These three exchanges account for 65% of global BCH trades. To put it simply, the listing of the BCHUSD pair in the Bithumb exchange is primarily the reason for a sharp rise in volume and price. This is evident from the rapid rise of Qtum coin, within days of listing in Bithumb. A similar occurrence is now seen in Bitcoin Cash.
Secondly, as Bitcoin Cash was given away to those who owned Bitcoin, before the fork, the built-in investor base enabled the cryptocurrency to generate huge volumes as soon it was introduced in the market. Bithumb also offered BCHKRW pairs for trading in the exchange. That is also a reason for the sudden rise in price and volumes.
A cryptocurrency can consolidate and remain in an uptrend only when its usage increases among non-investors. As of now, BCH is only a speculative cryptocurrency with little or no real business transactions backed by it. Thus, we can only consider the current rally as a part of the price discovery process.
On the contrary, the Greenback is strengthening in anticipation of a Fed rate hike in December. Further, the Senate has passed the budget blueprint, which paves way for the tax reforms. Thus, fundamentally, we forecast a downtrend in the BCHUSD pair.
Technically, the BCHUSD pair is facing resistance at 444.50. The stochastic oscillator is in the overbought region. Thus, we anticipate a downtrend in the crypto currency’s value.
In order to gain from the anticipated decline, we wish to go short near 444, with a stop-loss order above 477. Correspondingly, an order to book profit will be placed near 380.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
