Bitcoin Trading Alert: Bitcoin Goes up, but Not Decidedly

By: Mike McAra | Tue, Mar 11, 2014
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Bitcoin Trading Alertoriginally published on Mar. 11, 2014, 1:01 PM:

Very briefly: we are of the opinion that no short-term positions should be held at this moment.

The analysis of texts written by Dorian Nakamoto suggests that he might not be "the" Nakamoto sought by Bitcoin enthusiasts. Matthew Herper wrote yesterday:

I asked Juola & Associates, a firm that uses a technique called stylometry to identify the authors of anonymous texts, to compare e-mail, message board posts and letters to the editor by Dorian Nakamoto to writing attributed to the Satoshi Nakamoto who created Bitcoin.


John Noecker Jr., the chief scientific officer at Juola & Associates, had already become intrigued by the idea that his company's techniques could identify the real Satoshi Nakamoto.


His technique strips out formatting, and then examines: the author's average word length; the 100 most common words used; groups of consecutive words, because people often use the same phrases unconsciously; and what parts of speech they tend to use. Then those numerical values are analyzed mathematically.


"This does let us say fairly confidently that it's not Dorian," Noecker says.

In the meanwhile, Mr. Nakamoto himself denied having any involvement with the currency, and Leah McGrath, the journalist who first broke the Dorian Nakamoto story is getting a lot of flak, not only on Internet fora.

Whether Mr. Nakamoto is in fact the creator of Bitcoin or not, there definitely is a lot of interest in that matter, not only among Bitcoin aficionados.

Let's have a look at the charts now.

BITSTAMPUSD Bitcoin BitStamp (USD)
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The action on BitStamp was unimpressively flat yesterday. The currency was 1.7% down at the end of the day on volume higher than on the day before. The increase in volume was not accompanied by a more decisive move and the outlook was not changed, especially since there was no move below $600 (dashed red line in the chart).

If yesterday the moves were small, then today they're tiny. Currently the volume stands at BTC 3,348.53 (this is written at 11:05 a.m. EDT) which might be the weakest volume in days (the day is far from over, though). Bitcoin is 1.7% down but there has been no move below $600 and the momentum seems all but non-existent.

If the outlook hasn't changed and the move down seems to be dying out, we should be alert to any increases in volume. We can't rule out a move below $600 but our best bet at this moment is that the declines might stop at $600 or slightly below this level. We would expect a move in the direction of $700 (solid green line) afterwards.

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BTC-e shows us roughly the same picture - declines yesterday and today (so far) but no significant increase in volume. There has been no change in the short-term outlook.

The value of the currency seems to have stopped at slightly above $600, at least for the time being. If we see Bitcoin holding up above $600 this might mean that the immediate declines are over. A move below $600 is still a possibility but it seem as if the steam in the decline might have run out (at least temporarily).

We still think that the currency will go back to $800. There's no certainty about that but it looks like the whole Mt. Gox business was not enough to bring the currency down substantially. If such news cannot bring the currency lower than what we saw, it seems that it might go back to where it was before Mt. Gox's problems became more than apparent, i.e. to around $800. It's not a sure bet, but providing we don't get any new disastrous information, we see this as a possibility.

Summing up, we don't think any short-term positions have enough potential at the moment.

Trading position (short-term, our opinion): no positions. A break below $600 could be bearish if accompanied by substantial volume. Any move to the upside on strong volume could get Bitcoin as far as $700.




Mike McAra

Author: Mike McAra

Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts at
Sunshine Profits Contributing Author

Mike is a quantitative analyst focused on the economic reality, not theoretical models. His investment thinking is grounded on empirical evidence and common sense.

A holder of 2 master's degrees, in quantitative methods and finance, he researches economic uncertainty, portfolio management, and investor behavior.

Mike joined Sunshine Profits in 2009. He develops innovative investment tools, verifies usefulness of popular techniques, and provides thorough internal research. His quantitative and financial background, along with experience in the gold market and personal interest in bitcoin led to the launch of our Bitcoin Trading Alert service.

Mike passed the first CFA exam at the first attempt with the highest calculated percentage range in the following areas: Alternative Investments, Corporate Finance, Derivatives, Equity Investments, Ethical & Professional Standards, Financial Reporting & Analysis, Portfolio Management, Quantitative Methods.

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