Bitcoin: Remains above $450
In short: short speculative positions, target at $153, stop-loss at $515.
Banks are looking into the possibility to come up with their own
versions of Blockchain. At the same time, none of these emerging
solutions are as tested in real life as Bitcoin itself. So, the Bitcoin
network has its advantages, even if you are not a Bitcoin believer. On
the Bitcoin Magazine website, we read:
LedgerX CEO Paul L. Chou was one of the participants on the recent Cato
panel, and noted that the openness of the Bitcoin blockchain was the
first thing that attracted him to this new technology. Chou recalled his
excitement when first learning about Bitcoin:
“I think, for me, the most exciting thing was really this idea of an
open-access ledger that anybody could use and anybody could,
importantly, program on. So if you’re a 12-year-old kid with no
relationships to Wall Street ... before, it was impossible to get access
to any of the ledgers that banks use right now. Now, for the first
time, if you’re a talented 12-year-old programmer, you can build an
application that ‒ whether you like Bitcoin as a currency or not ‒ it is
moving some sort of value around in an automated way.
“We’ll find the next Mark Zuckerberg of finance potentially with this
open-access approach,” Chou said. “You want the people who can just
tinker on the side and not have to go through a lot of these meetings
and things to get access to all these systems that banks currently use.”
This is definitely one of the advantages of an open and largely
transparent network. Of course, this doesn’t mean that the banks will
reverse their course. Financial institutions need a measure of stability
that the Bitcoin network simply can’t provide in its current
incarnation. Banks and exchanges are heavily regulated, for instance by
the SEC, and for now the only way for them to embrace Bitcoin is to work
out a way to use the advantages of the currency in a setting controlled
by them, much like they use internal anti-money laundering systems.
On the other hand, the open Bitcoin network provides the measure of
innovation the solutions developed by banks are not likely to provide.
There are very interesting ideas floating in the Bitcoin space, such as
sidechains, which could make the Bitcoin network even more agile than it
is right now.
For now, let’s focus on the charts.
On BitStamp, we see Bitcoin relatively stable, back above $450 but below
$460. The situation is pretty much unchanged compared with our recent
commentary:
In short, we tend to think that it’s premature to herald a change in the
short-term situation. Yes, we saw a more pronounced move higher
yesterday and on the day before but this doesn’t necessarily make the
situation bullish just yet.
The most important bullish indication is that Bitcoin is now above a
possible long-term declining resistance line. This itself makes us
reconsider the current position. However, a look at past situations
shows that the implications are not as clear. Not all moves above a
long-term resistance line resulted in appreciation in the past.
Actually, a recent case when Bitcoin moved above the line was in
February and the move was followed by declines. There were other cases
like this, for instance in May-June 2014.
The move yesterday is a confirmation that the recent appreciation might
not be anything more than part of a correction within a long-term
downtrend. Today, we have seen relatively volatile action – the volume
is already almost as high as it was at the close yesterday (…). We
haven’t really seen a decisive move down but the volatility of the move
and the lack of a move up suggest that we might be on the cusp of a move
down.
The situation is now similar to what we saw yesterday, possibly slightly
more bearish as Bitcoin closed below $450. While this is far from sure,
it might be sign that Bitcoin is on the verge of moving more
significantly.
We are still of a mind that a move below $450 might be the trigger of
another move to the downside. This is even more the case as the weak
appreciation of the last couple of days has taken place on low volume.
On the long-term BTC-e chart, we see Bitcoin at $450, in a situation very similar to what we wrote previously:
The currency is now above $450 but this doesn’t mean that the situation
is bullish. Actually, Bitcoin is still at a possible declining long-term
resistance line which is around $460. So, even though we saw a move
back to $450, the move might be stopped by the resistance line. This
suggests that any appreciation now might be limited and that the
situation is still very much bearish.
Bitcoin is not oversold. Actually it’s out of the overbought territory
and it very much looks like the currency is after a local top and
possibly on the cusp of yet another move lower. The level of $450 also
coincides with a possible rising resistance line based on the August low
and the March local bottom. This suggests that any break below $450
might result in increased volatility. Another thing is that the next
possible resistance level is around $400 and not a very strong one. This
means that the next move down might not only be volatile but also
possibly steep.
This is very much up to date. The very weak move up we have seen in the
last couple of days is not a bullish confirmation in our opinion.
Another bearish hint is that we are right at the December-January highs
which might be an additional push against future appreciation.
Summing up, in our opinion speculative short positions might be the way to go now.
Trading position (short-term, our opinion): short speculative positions, target at $153, stop-loss at $515.
