The gist of today’s alert: we still are of the opinion that the situation is more bullish than not.
Paul Krugman, the winner of the 2008 Nobel Prize, continues doling out unfavorable comments on bitcoin. He even titled one of his most recent posts “Bitcoin Is Evil.” Intended as a joke, the title actually prompted the response of bitcoin enthusiasts who bombarded Krugman’s mail box with unfavorable messages.
It has also been pointed out, rather ironically, that back in 1998 Krugman wrote a piece for the Times magazine in which he stated:
“The growth of the Internet will slow drastically, as the flaw in 'Metcalfe's law'–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.”
So much for his ability to forecast, one might say. But what the quote shows is a general trait, supposedly highlighted by Yogi Berra, a former Major Baseball League player and manager:
It's tough to make predictions, especially about the future.
It’s not only Krugman who was wrong about the Internet. And just as it was impossible to precisely predict the development of the Internet in 1998, it is impossible to make meaningful predictions for bitcoin now. The point here is to reasonably use the opportunity bitcoin gives, while remaining cautious and only investing money you can afford to lose, just as some have profited since 1998 on the development of the Internet. There are no sure bets, though.
Since now we have some food for thought, let’s move on to what has happened in the market since yesterday.
Bitcoin moved 2.5% up yesterday from Sunday’s close ($785.01) and ended the day at $804.88 on Mt. Gox. The volume stood at btc 10,027.39 which was a 44.5% increase from btc 6,940.14 the day earlier. The overall picture yesterday was of a slight appreciation on moderate volume.
Today, bitcoin has been trading slightly lower, at $801.00 as this commentary is being compiled (slightly before 6:00 a.m. EST). The volume at the moment is btc 3,912.82 which might indicate a final volume stronger than yesterday, but still temperate (unless something unexpected happens, of course).
The price action of yesterday and today hasn’t been decisive and our remarks from yesterday on the possibility that investors might be waiting on the sidelines remain valid. Consequently, we are still on the lookout for the next move on strong volume.
As far as the price levels are concerned, bitcoin is still trading above the Dec. 7 and Dec. 18 close (respectively, bold and dashed red line on the chart). A move below the upper of those lines (at approximately $700) would be a first warning of a possible change in short-term sentiment. If bitcoin breaks below the lower line (around $550), we will consider the possibility that the sentiment has changed. This level coincides with our stop-loss suggestion for speculative long positions.
Summing up, there has been no change in the short-term sentiment and bitcoin still seems to remain on standby, waiting for the next big move.
Trading position: long, stop-loss at $550. Even though the pace at which the currency moves seems to have slowed down, you need to remain guarded as the situation may become far more volatile.
Because of the New Year’s Day holiday, the next Bitcoin Trading Alert is scheduled for Jan. 2, 2014.
On a personal note, I would like to wish you and your families a festive time today, and a Happy, Prosperous New Year.
Regards,
Mike McAra
