Bitcoin Trading Alert originally sent to subscribers on April 15, 2014, 11:08 AM.
In short: we don’t support any short-term positions in the market at the moment.
Bitcoin’s been going up since Friday and the media are having a hard time explaining why the currency has recovered its recent losses and has briefly gone over $500. Last week, we heard a lot about the crackdown on Bitcoin in China where the government had moved more decisively to make it harder for Bitcoin users to trade their coins in exchange for the Chinese yuan.
The story was that the fall in value of Bitcoin was supposedly caused by the Chinese developments. Last Thursday, in our Bitcoin commentary we expressed our reservations toward such an interpretation:
Banks in Australia and China have toughened their stance on Bitcoin. Whether this has rocked the Bitcoin boat remains uncertain but we’re definitely seeing more action now than we did in the last couple of days.
We usually are cautious as far as the cause-effect link is concerned. Any market is a complicated place with so many interrelations that establishing a reason for a particular outcome might be extremely hard if not impossible. Instead of focusing on the reasons why Bitcoin fell, we try to react to what’s going on with it now, not necessarily searching for a “reason.”
Let’s turn to the charts.
Bitcoin moved 10.1% up yesterday on strong volume on BitStamp. The move was a strong jump away from the $400 level (solid red line on the chart) into the $450 area. The $500 level (dashed red line) was not reached and the short-term outlook remained bearish.
Today we’re seeing another move up (this is written just after 10:00 a.m. EDT). The volume has been considerable and the currency even briefly went above $500. We still think that this is not enough to go long as Bitcoin has failed to stay above $500 so far and the general trend seems to be down.
Yesterday, in our Bitcoin Trading Alert, we wrote:
The short-term outlook remains bearish, although we might still see some appreciation. We expect it to be followed by either strong declines or a period of stagnation and, afterwards, depreciation.
This remains the case, in our opinion. The appreciation we’re seeing now might be followed by a period of stagnation or deep declines.
On BTC-e, Bitcoin went 10.3% up yesterday on strong volume, further erasing the previous week’s losses. The move was strong but Bitcoin didn’t make it to $500 and the short-term outlook remained bearish.
Today, the currency has continued to appreciate, going as high as $554.00 for a brief moment, before coming back down to around $490. The volume on BTC-e is one thing that suggests that the action today is quite significant. With more than BTC21,000 traded so far, the overall volume at the end of the day might turn out even higher than yesterday (no sure thing, though).
Why aren’t we considering long positions? First of all, the move has been quite strong but we still haven’t seen a close above $500. On top of that, Bitcoin has moved quite high in a very short period of time, possibly depleting the buying power. Our bet is that we’ll see a period of stabilization or a reversal to the downside in the near future, which would make betting on higher prices quite risky.
Summing up, in our opinion no short-term positions should be kept in the market now.
Trading position (short-term, our opinion): no position. The move up might lose its momentum in the near future – we’ll be looking for shorting opportunities then.
Thank you.
Regards,
Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts
