As Justin Sun’s reputation continues to suffer from media fallout, the price of TRON and BitTorrent plummeted over the past week. This technical analysis will evaluate whether TRX and BTT are likely to keep falling or begin a new uptrend.
Background on the controversial news
TRON and BitTorrent have gone through an extreme period of volatility after their CEO, Justin Sun, postponed his lunch with Warren Buffett a few days ahead of the meeting. Although the TRON Foundation maintained that the sudden decision was made due to health complications, different Chinese media outlets claimed that Sun was allegedly being persecuted in China for a range of illegal activities.
TRON Foundation announces postponement of Warren Buffett lunch, press conferences after founder Justin Sun falls ill with kidney stones. Parties agreed to reschedule at a later date. @GLIDEsf @WarrenBuffett
— TRON Foundation (@Tronfoundation) July 22, 2019
While Caixin reported that Justin Sun was under border control the day he postponed the lunch, the 21st Century Business Herald pointed out that he was being accused of facilitating pornography-related transactions through his social media company, Peiwo, alongside a host of other accusations related to the TRON Network.
Even though the accusations were never confirmed, later on, Sun appeared in San Francisco and published a statement on Weibo apologizing to the TRON community and Chinese authorities for “vulgar hype and marketing behavior.” This is after winning a charity auction with a bid of $4.57 million to have lunch with Warren Buffett.
The lack of clarity around the actions that the Chinese authorities are taking against the 28-year-old entrepreneur has left a lot of questions unanswered. For the full history on the controversies surrounding TRON refer to CryptoSlate’s full coverage here.
After reaching a high of $0.031 on July 20, TRON began to decline sharply two days later. The coin fell to $0.021 on July 28, representing a 29 percent drop.
The cryptocurrency is now trading between the 65 and 61.8 percent Fibonacci retracement zone, which is considered the ‘golden’ retracement area. This Fibonacci retracement level represents a pivotal point for TRX’s trend because it suggests a rebound, which may allow the uptrend to continue. However, a break below the golden retracement level is a strong signal of a trend reversal from bullish to bearish.
Even though TRON reached the ‘golden’ retracement area, there does not seem to be any indication in the lower time frames, such as the 12-hour chart, of an upcoming upswing.
The TD Sequential Indicator gave a buy signal in the form of a red nine over three days ago, but it did not get validated. As a result, the sentiment around TRX could be considered neutral under this time frame.
The sentiment will remain the same until there is a green two candlestick trading above a green one (bullish), or a red two candlestick trading below a red one candle (bearish).
The neutral sentiment can also be seen on the 4-hour chart. As the Bollinger bands squeeze indicating that TRX has entered a consolidation phase, the trading range between $0.0213 and $0.0233 is a reasonable “no-trade” zone. Breaking out of this trading range will determine whether this cryptocurrency will drop further, given that squeezes are typically followed by periods of high volatility.
A move above $0.0233 will increase the probability for a rebound, giving additional credibility to the ‘golden’ retracement zone seen on the 1-day chart. However, if TRX breaks below $0.0213 a trend reversal from bullish to bearish would be further confirmed.
BitTorrent has also taken a significant hit as a result of the controversies surrounding Justin Sun. Even more so after BitTorrent’s founder Bram Cohen publicly accused Sun of not making the final payment on the TRON Foundation’s $140 million acquisition of BitTorrent, Inc.
Anybody know if Justin Sun is hard up for cash? He isn't letting the last payment for BitTorrent get out of escrow.
— Bram Cohen (@bramcohen) July 25, 2019
Following the high of $0.0011 on July 20, BTT dropped 26 percent to reach a low of $0.00081 on July 28.
Nonetheless, when looking at a bigger scale, such as the 1-day chart, BitTorrent has actually been trading inside a descending parallel channel since late May. Everytime BTT reached the top of the channel it pulled back to the bottom, and when it reached the bottom it rebounded to the top—a pattern reaffirming the channel .
BitTorrent hit the bottom of its channel and bounced off to the middle (to then pullback) on July 15. Now that it is trading at the bottom of the channel, it’s more likely a similar pattern will recur. Breaking below the channel, however, will jeopardize the probability of a rebound and would likely leave the bears in control of BTT’s price.
As a result, the support and resistance levels on the 12-hour chart could help identify the different price points that will act as barriers containing the price of BitTorrent from being pushed in either direction.
Since BTT is currently trading around the $0.000780 support area, an increase in volume could push its market valuation upward and the $0.000880, $0.00103, and $0.00113 levels may act as price hurdles on its way up.
Conversely, if the $0.000780 support area is not able to contain the price of this cryptocurrency, it could lead to a break of the descending parallel channel seen on the 1-day chart resulting in a drop down to $0.000700, $0.000630, or lower.
The weak RSI divergence is visible on the 4-hour chart. The indicator could suggest that it would be wiser to wait for the coin to make a clear break of $0.000780 support prior to entering a trade.
Both TRON and BitTorrent are trading in neutral zones at the moment. Because of the tremendous impact Justin Sun has on the market price of these two cryptocurrencies, trading them while there is still the possibility of negative publicity poses a substantial risk. Therefore, a clear break of the 65 and 61.8 Fibonacci retracement zone (where TRX is sitting at now) and a strong move by BTT above or below the $0.00078 support zone would confirm whether they will continue declining.
In the meantime, short-term traders would be best served by waiting for additional confirmation.
TRON, currently ranked #12 by market cap, is up 2.38% over the past 24 hours. TRX has a market cap of $1.49B with a 24 hour volume of $444.34M.
Chart by CryptoCompare