Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18
The Value of Bitcoin - 11th Jul 18
America a Nation Built on Lies - 11th Jul 18
China, Asia and Emerging Markets Could Result In Chaos - 11th Jul 18
Bullish Gold Markets in the Big Picture? - 11th Jul 18
A Public Bank for Los Angeles? City Council Puts It to the Voters - 11th Jul 18
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - 11th Jul 18
Argentina Should Scrap the Peso and Dollarize - 11th Jul 18
Can the Stock Market Close Higher For a Record 10th Year in a Row? - 11th Jul 18
Why Life Insurance Is A Must In Financial Planning - 9th Jul 18
Crude Oil Possibly Setting Up For A Big Downside Move - 9th Jul 18
BREAKING: New Tech Just Unlocked A Trillion Barrels Of Oil - 9th Jul 18
How Trade Wars Penalize Asian Currencies - 9th Jul 18
Another Stock Market Drop Next Week? - 9th Jul 18
Are the Stock Market Bulls Starting to Run? - 9th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

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

© 2005-2018 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