Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

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

© 2005-2019 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