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Bitcoin Trading Alert: Stillness below $950

January 29, 2014, 10:02 AM

Bitcoin Trading Alert originally sent to subscribers on January 29, 2014, 9:57 AM.

If you don't have time: no changes, we don’t suggest closing long positions.

Benjamin Lawsky, New York State's first Superintendent of Financial Services, expressed the possibility of regulating Bitcoin under what he termed “BitLicense,” Reuters reported yesterday. Lawsky made the comment on Tuesday during a hearing on the currency. He admitted that preserving flexibility was also part of his agenda, because of the ever-changing technology:

That is, in part, why we're evaluating whether our agency should issue a so-called 'BitLicense' specifically tailored to virtual currencies.

He also seemed to see opportunity in the currency:

It could force the traditional payments community to 'up its game' in terms of the speed, affordability and reliability of financial transactions.

One of the main concerns of the regulator is money laundering and this topic was also covered, with officials asking Bitcoin entrepreneurs how Bitcoin-related businesses could best comply with traditional anti-money laundering regulations.

Despite the advantages of Bitcoin, Lawsky’s eyes are firmly on preventing any criminal activity:

If there's a choice between preventing money laundering and innovation, we're always going to choose squelching money-laundering first.

Right now, the so called “BitLicense” is only a vague idea. We would have to see more details coming from the regulator, but it’s definitely a start on the road to regulating Bitcoin.

Now back to the Bitcoin market.

Bitcoin moved down 1.2% on Mt. Gox yesterday, finishing at $933.00. The volume (฿10,017.57) was higher than on Monday but lower than on Sunday. Yesterday’s action was one of a move down possibly dying out.

Today, there has been no conclusive move so far (this is written just before 7:45 a.m. EST), with Bitcoin barely moving ($930.00 and 0.3% down at the moment). The volume has been far from impressive (฿3,414.77), so there are no immediate obvious bearish implications. A reversal to the upside is still possible.

The moves yesterday and today fit in particularly well with the current up-and-down action. The volume has its ups and downs too, and there are no apparent signs of either deterioration or improvement.

A question starts to emerge if it is not better to get out of the market at this point and wait on the sidelines with one’s capital to join the next more pronounced move. The longer Bitcoin holds its current level without breaking up or below out of the channel, the more pertinent this question will become. At the moment of writing, we would like to see at least another attempt to move beyond $1,000 before considering closing the current suggested position and stepping to the side.

Bitcoin price chart - Mt. Gox Bitcoin, BTC

Bitcoin is still between $800 (dashed red line on the chart, our stop-loss level) and the $1,000-1,100 range (solid green line). If we see another failed attempt to move above $1,000, we will consider closing longs (such decision would be based on current volume levels and other factors). If the currency breaks above $1,000, we might have a bullish confirmation and the current pause in action might end. On the other hand, a move below $800 could change the short-term outlook to bearish.

Summing up, even though the current period of calm has lasted some time now, we would like to see at least another attempt to break the psychological barrier of $1,000 before considering closing longs.

Trading position (short-term): long, stop-loss at $800. The current stabilization around $950 may seem prolonged but patience might be important at this time.


Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts

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