If you don’t have time: we are still more bullish than not but remain cautious because of the recent action.
For all the media hype about Bitcoin, it seems that it has become a major hit not only with journalists and bloggers but also with developers. Yesterday, Alex Williams posted an article on Techcrunch in which he shows that Bitcoin has been recently attracting far more developers than other payment businesses, PayPal and Stripe.
While developer momentum is by no means a perfect indicator, it seems to show the interest developers have in Bitcoin. Applications allowing users to access Bitcoin data seem to have become one of the hottest topics in the developer community, as shown on ProgrammableWeb.
This is good news for Bitcoin, since more developers might mean more innovative solutions and more appeal to users. On potential area where developers could help is the security of Bitcoin transactions, since Bitcoin payments and wallets need solutions which would make these payments as secure as the services currently provided by banks and payment processors.
Now back to bitcoin…
On Mt. Gox, bitcoin moved to $1,012.90 yesterday, down 0.2% from the close one day earlier. This means that the currency was virtually flat, despite the significant volume of btc 22,630.17 which was higher than the volume the day before yesterday (btc 21,223.75). So, we saw bitcoin moving one way or another on significant volume the whole day, only to end almost where it had been before. There seemed to be quite a lot of profit taking, but also capital was attracted to the market from the sidelines.
Today, the action has mostly been to the downside, with bitcoin depreciating 2.8% so far (this is being written at 7:50 a.m. EST). The volume, however, seems to be weaker than yesterday and it’s amounted to btc 6,337.31 (the strength of the move can, of course, change since we’re quite far from the end of the day). If the move is in fact down at the close, and it is completed on considerably weaker volume than yesterday, the implications might be bullish.
Right now, bitcoin seems to be testing the psychological barrier of $1,000. It’s trading below the Dec. 10 high ($1,068, solid green line on the chart), but above our stop-loss level ($800, dashed red line) and the Dec. 18 close ($541, solid red line).
If the currency moves strongly above $1,100, the situation might become bullish immediately and a move to $1,200 could follow. On the other hand, a move below $800 could change the outlook to bearish and bitcoin could go south in the direction of the $550 level.
The key take away here is to look for the next move on considerable volume or for a move down on low volume. A move down on high volume would be bearish, but a similar move on weak volume could actually be bullish.
Summing up, the seesaw move yesterday and the action down today haven’t changed the outlook to bearish so far, but we have to be weary of strong moves down.
Trading position: long, stop-loss at $800. We are on the lookout for more decisive moves here.
Regards,
Mike McAra
