Don’t have time? The outlook is still more bullish than bearish and we don’t suggest closing longs now.
The Forbes website reported yesterday that the U.S. Internal Revenue Service is reviewing Bitcoin as far as taxing is concerned. So far, there have been no clear guidelines on how to treat Bitcoin for tax purposes. Because of that, investors will chose whichever treatment suits them best when filing returns for 2013. For one investor, Bitcoin could be a currency, for another, a capital asset and so on.
When the IRS issues its guidelines on Bitcoin, this state of thing will change. It is still not clear whether Bitcoin would be treated as a capital asset (23.8 percent tax rate in the high-income bracket) or a currency (39.6 percent). The treatment of losses also differs. Obviously, this is important to investors, since buying or selling bitcoins could be subject to tax.
As with all innovations, the authorities need some time to respond. Government agencies all over the world are most probably facing similar challenges – is Bitcoin a capital asset or a currency. Or, maybe, something else? How about Bitcoin ETFs? We will probably see some clarification this year.
But have we seen some clarification as far as the most recent price moves are concerned?
On Mt. Gox, bitcoin declined 13.1% yesterday from Monday’s close to $880. 22,263.98 bitcoins were traded which was very close to the volume the day before (btc 22,630.17). While this might have looked like a significant decline at first, it was nothing unusual for the bitcoin market. More importantly, such a pause in the recent move up was one of the options we had considered.
Our stop-loss level at $800 was meant as one that would allow some depreciation before shielding investors from further losses. Why make room for depreciation? Obviously, it was not sure if bitcoin would actually finish the day down yesterday. On top of that, it seemed to us that the currency could move up sharply after such a move down.
This is what we’ve seen today so far. At the moment of preparing this alert (past 6:30 a.m. EST), bitcoin has moved 9.1% up from yesterday’s close. The volume at btc 8,256.93 might turn out to be more substantial than yesterday. The overall outlook has been bullish. Of course, we are still very early in the day and in the bitcoin market everything can change within minutes, but we’re seeing signs of a rebound right now.
Bitcoin is currently trading at $959.79, above our stop-loss level of $800 (dashed red line on the chart above). There is always the possibility that it will go down and break below this level. In such case we would suggest closing long positions and waiting for the next appropriate moment to enter the market with your speculative capital, since further declines could be substantial.
However, if the currency confirms the current bullish outlook by moving further away from $800 and the volume actually turns out to be higher than yesterday, bitcoin could move to the $1,000-1,100 range (and to the Dec. 10 high at $1,068 – the solid green line). If bitcoin moves above this zone, it could go as far as to $1,200 (the which coincides with the Dec. 4 close).
Summing up, despite the recent move down, the outlook for bitcoin hasn’t changed to bearish just yet. We don’t suggest closing long positions at the moment.
Trading position: long, stop-loss at $800. If bitcoin moves lower, we might hit the stop-loss level. On the other hand, a move above the recent high is still a possibility.
Today’s alert marks the beginning of the pre-order period for this service. Because of that, a short review seems appropriate.
In the period since the first alert was published (Dec. 30) we have suggested staying on the long side of the market. Since then, bitcoin has gone from trading at $804.88 to $959.79 (at the moment of writing this alert). I hope this 19.3% gain translated into similar gains for your portfolios (minus transaction costs). Past performance does not guarantee future results, but we look forward to keeping you informed about the recent price moves and to provide you with a well-rounded view on the current market situation.
The pre-order period starts today and will last for the next 7 days. During this time, you will still be receiving Bitcoin Trading Alerts for free, just as you have so far, but we have something extra for those of you who have decided they want to subscribe to the paid service. If you subscribe within the next 7 days, before the paid service is launched, you’ll save 20% on your first order.
Compared with the regular price for Bitcoin Trading Alerts, you will save $7.99 on the monthly subscription, $21.99 on the quarterly subscription, and $79.99 on the yearly subscription. Additionally, we will extend your subscription period by one week so that the pre-order time doesn’t affect your subscription. It’s 20% off for early birds. You can do the math for yourselves. Once you have, order Bitcoin Trading Alerts here:
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Since we’re starting to take pre-orders, I would like to thank you for the time you have spent reading my thoughts on the market. Once the paid service has kicked off, we will occasionally post bits and pieces from the alerts for free, but most of this service will be reserved for our subscribers. Stay tuned for more info on the market.
Best regards,
Mike McAra
