After a meteoric rise that not only catapulted bitcoin beyond the thousand-dollar milestone, but also into the hearts and minds of a previously unenlightened public, the simultaneously celebrated and ridiculed digital currency has met with some setbacks uncharacteristic in its short and somewhat mysterious (read: extremely perplexing) journey. With a price range at time of writing (Oct 25, 2014) settling around $350, this represents roughly a 70-percent decline from its parabolic peak. Is this now the opportune time for late-comers to join the party or has the Titanic set sail for its ill-fated collision with an iceberg?

The most problematic technical feature of bitcoin as it stands right now is that it has failed to definitively break a bearish trend channel that has been in place since the beginning of June, when valuations peaked at $700, but has since unceasingly descended down to an intra-day bottom of $280 in early October. Loyalists and other bullish traders have failed to build consecutive strings of momentum, with each rally attempt seemingly inviting the bears to cut the party short. The consequence, at least from a chartist’s perspective, is that the price action has created the dreaded “lower highs and lower lows” formation that is familiar colloquial lexicon for practitioners of Elliot Wave Theory. For the rest of us, it simply means that there is too much supply and not enough demand; therefore, the bears are in near-term control.

The Next Step in the Bitcoin Journey

However, this does not mean the current trend is permanent. When bitcoin “bottomed out” in early October, the volume of trading was intense, to the tune of 70,000. Such a level had not been seen since March of this year, when bitcoin prices suffered a massive collapse from its peak and eager newbies were quick to jump on the bandwagon. The increased volume coincides with the fact that since the bottoming incident, bitcoin has not breached a new low. While it’s still far too early to make a judgment based on a few weeks’ worth of trading activity, potential investors may want to take note: if the digital currency can stay range-bound at $350 until the end of this year, it will break the bearish trend channel. If and when this occurs, history has shown us that good things may happen.

Bitcoin is, quite literally, financial trading on crack. Whereas all other markets are subject to the confines of the human experience (ie. schedules, time zones, sleep), bitcoin is on all the time, every time. So long as there is a computer that has access to the internet, digital currency trades can be accomplished from the farthest ends of the earth. This unique environment suggests that psychology carries a greater leverage in digital markets than it does in traditional financial sectors. Should enough buyers hold the line for bitcoin for a few more months, it is more than conceivable that a new wave of bullish sentiment could enter the market. If the last surge to $1,200 occurred with relatively small fanfare (as compared to the multi-trillion dollar central bank dictated global equity markets), imagine the possibilities that an educated and eager support base could provide!

So long as bitcoin can be prevented from dipping below $300 for a pronounced period of time, a reversal could be closer than previously expected. The forecasted implication of the current bearish trend channel is for the price to hit $250 by mid-December. From the activity witnessed over the past twenty-plus days, this ominous target appears less and less likely. Should prices remain stable over the next thirty days, investors may want to consider adding to their positions.