Crypto Markets: Bitcoin, Up or Down? Short term view

• Thanks to www.tradingview.com for the chart

  No matter how much Blockchain is pontificated and bitcoin is a taboo in formal meetings, when the official part is over, we can see eyes shining a brighter light with the conversations switching to unorthodox topics “…did you buy it? When did you buy? Have you sold? Is it going down or is it rebounding?”

  People get hooked to things that give us an immediate feedback. Markets do, especially volatile ones. Scratch cards do. Blockchain does not, unless you have a company and investors keep putting money in it. Blockchain technology needs time to mature and rest of the world needs time to adapt to it. Its value will come to fruition at some point down the line.

  Together with the immediate feedback of its market, Bitcoin comes with the illusion of quick gains.  Crypto-billionaires have become a hot topic in the media and a hoard of poor saps have indebted themselves to buy in such a dream. In the last few months of 2017, mostly people would tell me they had bought and been holding for some time. Those who had bitcoin were geniuses. Most of them had no idea how Coinbase is different from Kraken, still they would jump into any conversation to masterfully advice on how and what. I heard of so many colleagues of a friend of a friend, who had become millionaires with bitcoin.

  2018 has swallowed the millionaires’ millions, and their masterfulness must have gone too. Some of them are busy restructuring debts.

  At Principio we love building up on blockchain and its potential, but we come from the financial markets, so we enjoy playing with bitcoin’s prices and other cryptos’. We say playing, because we don’t make considerable investments. If it is more painful than having our mobile jammed, it doesn’t suit us (of course some have more expensive cellphones than others!!). So yes, we don’t do intraday trading, but buy it, in tranches, we sell it, in tranches, and we have a view.  But before we talk about this, please read the disclaimer:

  • Bitcoin prices don’t make any rational sense. Fundamentals of value are inexistent in this world. People only buy because they think they can sell the following day/month/year at a higher price, which generally is not the case;
  • This does not constitute a recommendation to buy, sell or hold bitcoins or any other cryptocurrencies. The information may not be current when you read them;

  At the beginning of February bitcoin broke its 200 days moving average. It hadn’t happened in an up-trend since a very long time. In a “normal” market this would represent a bearish signal: sell or go short. Given the high volatility of bitcoin this has instead been mostly taken as a buy signal. The value has instantaneously rebounded above the 200MA with good strength.

  The volume has dissolved pretty quickly though. Therefore we are waiting in these days and want to see what’s going on. We think that:

  • If it reaches above $10.000 for at least one day and shortly after (max 5 days) moves below $9.000, we will be in bear market for months.
  • If after staying above $10.000 doesn’t significantly go below $9.500 for at least 5 days. The bull will ride again.
  • Otherwise, lateral – but this seems to be unlikely.