Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Has Bitcoin Been Shot Down?

Currencies / Bitcoin Apr 28, 2018 - 08:23 AM GMT

By: Mike_McAra

Currencies

Another week, another outrageous prediction for the price of Bitcoin. We just saw a forecast at more than 75 times the current value of the currency. The figure is $700,000. Is Bitcoin really about to take off to the Moon or has it been shot down?

The honest answer is that nobody can say this with certainty. It’s probably not the answer you expected but we are more interested in giving you accurate information than false enthusiasm. Before we give you our view on the matter, let’s get to know the $700,000 claim. In an article on the Fortune website, we read:

John Pfeffer, a partner at his London-based family office Pfeffer Capital, is not only betting on Bitcoin, but giving it a bold price target of $700,000—about 75 times the current Bitcoin price of nearly $9,500.


(...)

But Pfeffer has even higher hopes for Bitcoin—that it could eventually be to central banks what traditional foreign reserve currencies are today. (From euros to Japanese yen, governments hold foreign cash to pay down international debts and complete other cross-border transactions.) “It’s imaginable that Bitcoin displaces some form of reserves over time,” Pfeffer said at the conference.

Total foreign reserves are currently worth $12.7 trillion, he added. While it’s unlikely Bitcoin would fully replace all foreign reserve currency, Pfeffer also modeled scenarios in which Bitcoin would account for a quarter of foreign reserves, which would imply a 20x return from current prices. And if the total value of Bitcoin does rise to the equivalent of all foreign reserves, or $12.7 trillion—including both gold bullion and reserves combined—then that would mean a Bitcoin price of $700,000.

“As an investor, what interests us most at this point is that Bitcoin might become the dominant non-sovereign currency,” said Pfeffer. Although he puts just 1% odds on Bitcoin actually hitting $700,000, the possibility alone is enough for him “to make a small, venture capital-style, buy-and-hold longterm bet on,” he said.

Peeling back layers of the answer, we see that the $700,000 is not as outrageous as it might seem at first sight. Why? Mainly because of the probability associated with such a scenario: 1%. Is there a 1% chance of Bitcoin going to $700,000. Again, nobody can tell. But it seems a whole lot more probable than claims that Bitcoin will go to $1,000,000 “for sure.”

Pfeffer also incorporates some more conservative targets for Bitcoin, for instance at $90,000, which doesn’t seem all that incredible given how Bitcoin has been trading in the past. Our main point here is that you can definitely view Bitcoin as a vehicle which could go up a lot – it has done so a couple of times already. At the same time, we wouldn’t bet heavily on it going to the Moon – we would rather view it as a private-equity-style investment, with very small positions potentially improving the overall portfolio. This is not investment advice, though. Each investor has different needs and constraints so there are no one-size-fits-all investment strategies here.

Do we see any signs of Bitcoin taking off right now? Some commentators seem to believe this. We are skeptical, at least for the time being. Charts might explain why.

Reversal Pattern in Sight



On BitStamp, we actually do see one important change. It’s probably not what you would expect reading stories all over the Internet. Namely, Bitcoin reversed course yesterday on elevated volume. This looks like a classic reversal pattern at first sight. But is it one?

Our take is that it might be. The reversal more than erased the previous day of appreciation and the volume was visibly higher than on the day before yesterday. The depreciation also brought Bitcoin back to the level of the local top from back in the second half of March. This is a bearish indication. But there’s more than that.

The potentially most important development is visible on the chart above. During the last bout of appreciation, Bitcoin went above the 38.2% Fibonacci retracement level which was a weak bullish development. The currency then completely denied this move going below the 38.2% level with a vengeance. So, we just saw a potential break above an important resistance, which was then promptly invalidated. This a relatively strong bearish development and it suggests that down is the direction in which the currency is still moving.

Possible Local Top in Bitcoin



On the long-term Bitfinex chart, we see the recent move up in perspective. Actually, the last two days of appreciation and immediate depreciation are visible on the chart as well and they look very much like a local top.

Bitcoin came closer to the 78.6% Fibonacci retracement level and to the rising support line based on the previous local bottoms. This means that the pace of the move up has slowed down considerably and if we see a move down below this line than we could conclude that the move up was simply a corrective upswing. Even without this move down, the current situation is more bearish than a couple of days ago as we might have just seen a local top based on the price action and the increased volume during the decline.

Another thing supporting a possible local top is the reading from the RSI indicator. We saw this indicator going to 70, which is the beginning of the overbought area. The fact that we saw a reversal just as the RSI got on the verge of an overbought reading suggests that we might have seen a local top indeed. This is not 100% certain, and we could still see a move higher but the situation looks more favorable for bears than it did a couple of days ago.

The most important part from the long-term chart is the thing that didn’t change. Bitcoin is still very far from the 61.8% retracement level, not to even mention the 38.2% retracement. We have potentially important resistance levels on the move up as well which suggests that even if we do see a move up, it might be limited in scope, for Bitcoin that is.

Bitcoin has not been shot down but the current situation remains bearish. For the time being, it seems that the profits on our hypothetical positions might grow further.

Summing up, Bitcoin moved up but reversed course on elevated volume, which suggests we might have just seen a local top. If we don’t see any action to the upside in the next couple of days, the chances of a serious decline will grow, in our opinion, and we would definitely want you to know that.

If you have enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up now.

Regards,

Mike McAra

Bitcoin Trading Strategist

Bitcoin Trading Alerts at SunshineProfits.com

Disclaimer

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 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