Bitcoin Trading Alert: Not Enough Bearish Clues for Bitcoin

By: Mike McAra | Wed, Jun 4, 2014
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Bitcoin Trading Alert originally published on June 4, 2014, 10:36 AM


Cutting right to the chase: we don't support any short-term positions in the Bitcoin market now.

CNBC relayed an e-mail it had gotten from Roger Ver, Bitcoin millionaire:

Bitcoin, the controversial cryptocurrency, finally may be back in investors' good graces: It's up more than 80 percent from its April lows on a wave of good news and wider acceptance.

"Recently more and more people are realizing how much of a world-changing technology bitcoin is," Roger Ver, the bitcoin investor sometimes known as "Bitcoin Jesus," wrote in an email to CNBC. "We will see more and more of this until each bitcoin is at least tens of thousands of dollars each. I think this will happen sooner than any of us expect."


And the latest news of bitcoin acceptance comes from a potentially unlikely source: Rapper Curtis "50 Cent" Jackson, who is reportedly accepting the currency for his new album "Animal Ambition."

"The positive news never stops," Ver said.

There's no apparent reason for the recent surge in the price of Bitcoin but the mere fact that the price has gone up inspires more positive comments in the mainstream media. While one cannot be certain that Bitcoin will actually trade at "at least tens of thousands of dollars," the underlying potential of the currency makes it particularly interesting.

This might be the case even more now since it looks like we've just seen a major breakout and the medium-term outlook is tilted to bullish.

Now, let's take a look at the charts.

BITSTAMPUSD Bitcoin BitStamp (USD)
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On BitStamp, Bitcoin continued the appreciation pattern yesterday, however, on falling volume. The move itself had rather bearish implications but not bearish enough, especially given the recent volatile days followed by appreciation.

Today, the volume has picked up decidedly - it's already higher than it was yesterday (this is written before 10:00 a.m. EDT). What is more important, the exchange rate has gone down more than 4% so far. Recall what we wrote yesterday:

Because of the fact that we've just seen a strong period of appreciation, we might expect a pause in the nearest future, possibly a move back to $600 which would be followed by more appreciation.

This is what we're seeing today. Bitcoin moved to around $620 before stabilizing. If we don't see more depreciation in the next few days, this might be a buying opportunity.

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On the BTC-e long-term chart, we're seeing a move back to the declining trend line. The line, however, hasn't been touched. What is more important, Bitcoin hasn't moved below $600 so far.

This confirms what we wrote yesterday and makes it all the more up to date:

Right now it seems that the medium-term outlook might be bullish. As far as the short-term outlook is concerned, we expect to see some deterioration shortly, possibly to the level of $600. If the bullish medium-term outlook holds, this would be followed by more moves up.

If today's action is followed by more appreciation or we don't see a move below $600 in the next days, we might have both a short-term and medium-term buying opportunity.

Summing up, in our opinion no short-term positions should be kept in the market now.

Trading position (short-term, our opinion): no positions. If there's no more depreciation in the following days, we might have a buying opportunity.




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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