Bitcoin looks set to break the $620 figure. The level held the onslaught of the bears since early July but due to the constant pressure during the last two days and especially today, the support will likely give way. After we break $620 the next level to look out for is the $610 figure. This was the swing high reached back on June 18th and will likely support prices on the way down. The round $600 figure is an important line in the sand. If we manage to make a significant break below, it will likely spell the end of the current upswing. Below this, the $550 level stands as a crucial milestone. A break below will lead to a resumption of the medium-term trend lower.
To the upside, we find the first level of resistance at the $654 swing high. Above this, the June 3rd swing high at $667 marked the end of the May bitcoin rally. A break above $667 will lead to a continuation of the move up to $700.
A lot has happened since my last article (http://blog.fxopen.com/bitcoin-where-are-we-going-from-here/). The biggest risk event last month was the bitcoin auction for 29,600 BTC seized during the FBI raid on Silk Road. The US Marshall, which conducted the auction, didn't release any public info on the price paid per bitcoin. However, price action immediately preceding and following the auction, as well as betting on bitcoin prediction markets, indicate that the winning bidder paid at least $600 per BTC and likely much more than that. Prices rallied in the aftermath of the auction but stopped short of breaking the previous swing high at $667.
The second major risk event was EBA's warning to Europe's financial institutions. The European Banking Authority outlined no less than 70 potential risks associated with virtual currencies. The regulatory body ranked the risks by high, medium and low. The risks range from users suffering loss when an exchange is fraudulent and potential losses caused by the drop in value of virtual currencies to the possibility for money laundering and terrorism funding.
The idea for the creation of a centralized body that would be responsible for bitcoin goes against the very core of cryptocurrencies and their decentralized nature. It remains to be seen how strong national governments will implement the EBA's suggestions. But even without new rules written up, the warning to financial institutions could stifle growth in Europe's bitcoin economy as banks choose to err on the side of caution.
The article is written by Petar Kotevski and is participating in the Forex Article Contest. Good luck!
Bitcoin: Where Are We Going From Here?