Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bitcoin Trading Alert: Starting Point of Decline Not Far?

Currencies / Bitcoin Sep 27, 2016 - 05:27 PM GMT

By: Mike_McAra


In short: no speculative positions.

The treatment of Bitcoin by asset management firms is slowly changing. The digital currency is by no means as popular as traditional assets, however, investment companies sometimes approach Bitcoin as a new asset class, one that might be on its way to maturity. Money Morning cites a report on Bitcoin by Needham & Co.:

Needham's case for boosting its Bitcoin price prediction is based on three central ideas: that it is increasingly behaving like other investment classes; that adoption is accelerating; and that changes to the software itself will make it more useful.

Bitcoin has endured a lot of criticism for its flaws compared to conventional investments, particularly its high volatility and limited liquidity. But that's been changing, Needham found.

"Bitcoin's daily volatility is now comparable to small-cap equities," Bogart wrote.

Where Bitcoin's volatility is about 3.3%, the Standard & Poor's Small Cap 600 is 2.6%. The report also notes that some tech stocks and oil prices are slightly more volatile than Bitcoin now.

Regarding liquidity, Bogart [author of the report] wrote that "Bitcoin's daily dollar volume roughly resembles that of a U.S. mid-cap security," even just using the top five Bitcoin exchanges where the digital currency can be traded for U.S. dollars.

Liquidity — the ability to buy and sell an investment as needed — is a vital consideration, as no one wants to be stuck in a position they cannot exit. Bogart noted that investing in Bitcoin even has some advantages in terms of liquidity, as the Bitcoin exchanges are open 24/7.

Another appealing aspect of Bitcoin is that its price moves have virtually no correlation with other investments. That makes it appealing as an investing hedge to guard against sudden price drops in other asset classes.

Our general comment here is that Bitcoin is still very far from being an asset class like precious metals. This is mainly because digital currencies are not accessible via traditional broker channels. The few exceptions, like the Bitcoin Investment Trust, have been just that so far, exceptions. Things might change with the advent of new Bitcoin ETFs but these have been in the works for years now, so there’s not that much to get excited about just now.

The report highlights that Bitcoin has been slowly converging toward the volatility we might expect of traditional asset classes. Whether this trend is here to stay is not at all clear, events in the like of the Mt. Gox failure might still shake the market violently, particularly as Bitcoin is not traded on traditional exchanges. On the other hand, the general trend seems to be one in which Bitcoin is still volatile but not quite as volatile as it was in, say, 2013.

For now, let’s focus on the charts.

On BitStamp, we see that Bitcoin came back from under $600. Is this a very important bullish development? Recall what we wrote previously:

So, the currency has stayed above $600. This is a weak bullish indication, possibly a lot weaker than might seem at first sight. The first point to make is that Bitcoin hasn’t really moved much since the recent decline. Actually, the price action has been really muted. Another point is that the volume hasn’t been pronounced. These are potentially bearish developments. On the other hand, Bitcoin is still above the 38.2% Fibonacci retracement levels. As such the situation is still not very well defined any way.

As the situation plays out, we have seen virtually no changes apart from the fact that Bitcoin has now stayed in the consolidation pattern for longer. The volume has been particularly low recently. The implications remain largely unchanged. One remark here is that we don’t have to see much action to the downside for the situation to switch to bearish as far as the short term is concerned.

[Later alert] If the previous developments weren’t strongly indicative of either a bearish or bullish trend, today we see some clarification. The most visible change is that Bitcoin is now below $600 and the move below this level took place on increased volume, not explosive but slightly nonetheless. Does this mean that the situation is bearish enough to go short?

So, Bitcoin is above $600 at the moment of writing (around 11 a.m. ET). Yesterday’s close was below $600. Overall, the currency is dancing around $600 without a decisive move. This possibly means that today’s action is not confirmed. Even more the case if we have a peak at the volume which has been very tiny today. It wasn’t high in the last couple of days either. Taking these indications and putting them together doesn’t actually leave us with very strong bullish hints.

On the long-term BTC-e chart, we see Bitcoin’s jittery movement around $600. Our previous comments:

We have just seen a first symptom of the beginning of a possible move lower. Is this enough to go short? In our opinion, it isn’t. First of all, even if Bitcoin closes below $600 today, this will only be a second close below this level. Also, the actual move below $600 hasn’t been quite pronounced. In other words, Bitcoin still looks like “glued” to $600. If we see more daily closes below this level, we might be inclined to consider shorts. Now, we are relatively close to the 38.2% retracement based on the decline from the June top but not yet at this moment. Now this means that a decline might occur any day now, but there are not enough indications to open hypothetical short positions at the moment. This might change in the next couple of days.

The bearish indications we saw previously are somewhat weakened as Bitcoin is now further away from the 38.2% retracement level. The situation is not yet bearish enough to go in and open hypothetical short positions. The situation might change in a matter of days, however, as we’re not very far from a possible starting point.

Summing up, in our opinion not having speculative positions might be favorable at the moment.

Trading position (short-term, our opinion): no positions.


Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts at


All essays, research and information found above represent analyses and opinions of Mike McAra and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mike McAra and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. McAra is not a Registered Securities Advisor. By reading Mike McAra’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Mike McAra, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Mike McAra Archive

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in