Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
Fibonacci And Elliot Wave Predict Stock Market Breakout Highs - 21st May 18
Stock Market Ideal Cycle Low Near - 21st May 18
5 Effects Of Currency Fluctuations On The Economy - 21st May 18
Financial Conditions are Still too Easy for the Stocks Bull Market to End - 21st May 18
US Stock Market Elliott Wave Predictions for 2018 and Beyond - 20th May 18
Are You Still Fearful of Cryptos? - 20th May 18
US Stocks - Why I am Short-term Bearish, Medium-term Bullish - 20th May 18
Looking for a Turn in Gold Price - 20th May 18
GDX Gold Mining Stock Fundamentals 2018 - 19th May 18
Semiconductor Stock Market Canaries: Chirp, Warble… Soon a Croak and Silence? - 19th May 18
Three Drivers of Gold Price - 18th May 18
Gold Market in First Tertile of 2018 - 18th May 18
What Happens Next When Small Cap (Russell) Leads the Stock Market - 17th May 18
Negative Signs for EUR/USD? AUD/USD - Battle - 17th May 18
DOW Jones and CRUDE Oil on a Cliff Edge, Waiting for a Nudge! - 17th May 18
Gold Price No More Subtleness – It’s Show Time! - 17th May 18
VIX Cycles Point to Stock Market Correction - 17th May 18
Trump Sounds End Times Armageddon Trumpet for Jerusalem, Israel Evangelical Prophecies - 16th May 18
Our Next Stock Market Dow Fibonacci Price Targets – Get Ready! - 16th May 18
The Coming Copper Crunch - 16th May 18
Stock Futures Are on a Sell Signal - 16th May 18
What to do When the IRS Comes for Your Property - 16th May 18
IS BITCOIN ANONYMOUS? - 16th May 18
Bitcoin Tide Might Have Turned - 15th May 18
UK Online Gambling Market Grows According to UKGC - 15th May 18
Stock Market Study: What Happens Next when Dow Goes Up 8 Days in a Row - 15th May 18
Fibonacci Price Ladder Points to Higher Stock Prices - 15th May 18
U.S. Dollar Rally Is Doomed - 14th May 18
Gloomy Scenarios for the Fed That Should Boost Precious Metals - 14th May 18
US Dollar One Reversal Too Many - 14th May 18
SPX futures are higher, but so is VIX - 14th May 18
Precious Metals and Miners NUGT – The Sleeping Giant Trade - 14th May 18
Is This The Netflix Of Cannabis? - 14th May 18
US Quest for Iran Regime Change: Will EU Sustain the Nuclear Deal - 14th May 18
Stocks Bears Last Stand - 14th May 18

Market Oracle FREE Newsletter

Trading Lessons

Bitcoin Market Crashing: Is this the end of Bitcoin or a pause before the next Bull Run?

Currencies / Bitcoin Jan 24, 2018 - 12:59 PM GMT

By: Sol_Palha

Currencies

For greed all nature is too little.Seneca

Whenever the masses fully embrace a market, trouble is usually close at hand, and that's what occurred with bitcoin; the masses were completely enamoured with Bitcoin. The masses were euphoric and were expecting bitcoin to soar to the next galaxy. Wild targets of $100,000 were being issued that sounded more like the ravings of a lunatic than of an expert. In an article published on the 4th of December 2017 we made the following comments:


Bitcoin, on the other hand, is now in the feeding frenzy stage, so this market is ripe for a correction.  Tactical Investor

The problem with Bitcoin is that it’s not the only cryptocurrency; every Tom, Dick and Harry can issue a cryptocurrency, and to date, that is is what is occurring as we speak. There are so many cryptocurrencies out there that it in our opinion the better way to score a home run would be to issue your own cryptocurrency.

What caught our attention was that the masses were jumping up in joy and embracing bitcoin, but for over nine years they refused to embrace the equities bull market.  Mass psychology states that when the masses are euphoric (not to be confused with bullish); the outlook is going to take a turn for the worse. And more or less that’s what transpired with bitcoin.  

Clear Psychological signals that all was not well

  1. Long Island Ice tea; a company that has nothing to with the Bitcoin market decided to change its name to Long Block Chain Corp. Mind you the name change had not taken effect yet, but the effect on the stock price was immediate; it tacked on almost 200%.

The CEO of Long Island Ice tea had this to say about the upcoming name change:

"We view advances in blockchain technology as a once-in-a-generation opportunity, and have made the decision to pivot our business strategy in order to pursue opportunities in this evolving industry,"

What a load of rubbish as no one in the company has a clue as to how blockchain operates. It’s interesting to note that other than the intended name change, this company has no viable block chain product (as of the date of the above announcement). It just thinks it would be a good idea to get into this market. The company makes beverages for crying out loud. Before the name change, its stock was down roughly 40% for the year.  It is a tiny company with sales of just $1.6 million, and viola all it had to do was change its name, and its stock surged.

  1. Riot Block Chain was known as Bioptyx, and its price soared after it changed its name.  LongFin (LFIN), a financial company saw its price skyrocket after it announced it would be buying a blockchain microlender.  And most recently Kodak decided to take a similar route, and its stock price jumped.

At this rate, even companies that specialise in garbage might decide that it’s a good time to add the words blockchain to their names.  Hey, why not right? It’s like share buybacks on steroids; here you don’t even need to borrow money to buy back your shares, just change your name and voila, your stock soars in value.  

  1. The creator of Litecoin Charlie Lee sold his entire stake before bitcoin crashed; he claims it was due to conflict of interest. Strange he waited till now to sell it. Maybe it took a few hundred million for him to figure out that there was a conflict of interest issue?  http://bit.ly/2leWumd
  2. People were taking out mortgages or cash advances on their credit cards to invest in Bitcoin. Taking money you don’t have to buy something you can’t afford in the hopes you score a home run; what could go wrong with such a brilliant plan?

The last Psychological Straw?

When two experts, James Altucher and John MacAfee stated that bitcoin was destined to soar to $1 million, it was almost a given that the outlook would change for the worse. We sent out the following warning to our subscribers:

Bitcoin is now in a full-blown mania stage; people are taking mortgages to speculate on bitcoin. Insane price targets of $1 million are being tossed into the air, and the masses are lapping it. That is how the market works, it gives and gives but then it strikes and takes everything back ten times faster. Market Update Dec 17, 2017

Bitcoin futures; the perfect vehicle to manipulate Bitcoin

Bitcoin futures provides a great venue for the big sharks to swallow up the silly sardines hoping to strike it rich.  The big players can now manipulate the bitcoin market via the futures market. They can use Fiat money (worthless paper) to push it up or down, much the same way they did and are still doing with the precious metals markets. Which illustrates the lie behind the “Bitcoin is different nonsense”;   Bitcoin is nothing but digital fiat; in some ways, its worse as anyone can issue their own cryptocurrency.

So what’s the outlook for Bitcoin?

bitcoin 2  Jan 22, 2018.jpg

Courtesy of https://finance.yahoo.com

If you look at the above chart, it puts into perspective how fast the situation went from excellent to unpleasant/painful. While the crowd is anxious, they are still not in panic mode.  The bloodletting will continue until the trend of lower highs that started after Dec 14, 2017, comes to an end.  On the conservative side, we think Bitcoin could drop down to the 8,800-9,200 ranges, but this market is far from your typical market, and there is a good chance that Bitcoin could drop down to the $5000-$5600 ranges before the dust settles.   The masses are notorious for selling at or close to the bottom, so while $5000 might appear implausible now, just remember that panic has a way of distorting reality. When a person panics, they forget what they are doing, their objective is to get out of the game as fast as possible regardless of the cost.

Bitcoin will trend upwards again, but the trending upwards does not mean it has to surge to new highs.  A bottom will be close at hand when experts stop issuing lofty targets and turn on this market.  Compared to the wild bubble like action the bitcoin/blockchain sector has experienced, the equities markets appear almost timid. One could argue that if these markets follow a similar path, then the Dow and SPX could trade a lot higher before experiencing a strong correction. And that lofty targets of Dow 30K might not be that lofty after all.  We will discuss this in a follow-up article, which we hope to publish with the next 1-2 day. 

For those who want to play the bitcoin market,  a somewhat safer alternative would be via Bitcoin Investment Trust (GBTC). Its quite liquid and you can jump in and out with the click of a mouse.   Consider waiting until the sentiment turns decidedly negative or bitcoin is trading at least in the $8000 ranges before deploying some of your funds and don’t bet the house on this market. 

On a final note, the outlook for Gold right now is far brighter than that for Bitcoin.

Ability will never catch up with the demand for it.

Malcolm S. Forbes

by Sol Palha

www.tacticalinvestor.com

Sol Palha is a market analyst and educator who uses Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the right side of the market. He and his partners are on the web at www.tacticalinvestor.com.

© 2018 Copyright Sol Palha- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules