Bitcoin Trading Alert originally published on January 30, 2015, 11:28 AM.
In short: speculative short position, stop-loss at $257, take-profit at $153.
The Coin Center's recent survey reveals that a majority of Americans still don't have an idea what Bitcoin is. It seems that we're still a long way from cryptocurrencies being recognized by the general public to the extent credit cards or money transfers are recognized. In the Coin Center's announcement, we read:
There is no doubt that Bitcoin is in its infancy. We are still on the bleeding edge of the technology adoption cycle and it is only now beginning to emerge as a viable option for mainstream users. In other words, we've got a long road ahead before my grandmother is trading cryptocurrency and notarizing her important documents with a blockchain (despite my best efforts).
The results are more or less in line with what we expected: People still don't really know about Bitcoin. Despite the wave of news coverage over the last couple of years, around 65% of respondents were not familiar at all with it. Of those respondents who are familiar with Bitcoin, consistently over 80% have never actually used it.
It is clear that there is more work to be done. Public policy generally reflects public sentiment on a subject. That's why such a profound lack of familiarity is particularly alarming. It's also an opportunity, however. What we see is a large gap in public understanding of Bitcoin, and part of our mission is to help close this gap so that any policy decisions made with respect to Bitcoin are well informed, good for competition, economic growth, and technological innovation.
For all the hype we can find on the Internet, the actual numbers still point to the fact that the cryptocurrency is in its infancy. More than half respondents don't know what Bitcoin is. This is very far away from general awareness. With Bitcoin, the thing might be that the more retailers accept it, the more people would want to use it. So, the currency would have to gain a critical mass to become attractive to customers which could in turn make it more attractive to retailers. But there would have to be a number of both at first.
How far away might we be from Bitcoin or blockchain-based becoming widespread payment solutions? To try to assess that, we would have to look at how quickly innovations become standards. For credit cards it took 20-30 years, one could argue. For the Internet it also took 20-30 (these are raw estimates). So, does this mean that Bitcoin might take more than 15 years to develop into a generally accepted payment network? It might, but Bitcoin might also take a different path. For all we know now, there's a possibility to use the blockchain not only to move around money but also to be a verification process in various other kinds of activities. Which way Bitcoin and the blockchain will go remains unclear but there seems to be very much potential in the system.
For now, let's focus on the charts.
On BitStamp, Bitcoin closed flat yesterday with daily fluctuations. The volume was similar to what we had seen on the day before - relatively significant. If you recall our yesterday's comments:
(...) Bitcoin plunged to around $225, well below the recent possible rising trend line and the $250 level (solid green line). This might have been the first major bearish sign in days, particularly if you take into account that Bitcoin has also depreciated today (this is written after 9:15 a.m. ET). The volume has been relatively strong so far, and it might turn out to be similar to what we saw yesterday (the day is not really over yet).
The volume stayed this way and Bitcoin failed to move decisively in any direction. Given the fact that this was all below $250 (solid green line in the chart) and the recent rising trend line (black line in the chart), this could be read as a bearish indication.
Today, we've seen more of the same (this is written after 11:00 a.m. ET). Bitcoin went up almost to $245 but it retraced afterwards and now remains close to where it opened. The volume is again similar to what we saw yesterday and on the day before. There have been no significant changes since yesterday.
On the long-term BTC-e chart, Bitcoin is still well below both $250 (solid green line) and the one of the possible declining trend lines (upper black line). Again, our comments from yesterday are still valid here:
Bitcoin went down strongly yesterday and it's been also down today, which all points to the conclusion that there might be more declines to come. At the moment, we are inclined to think that Bitcoin might go as low as to the level of its recent low at $160, possibly even lower, below the level of $150 (solid red line in the chart). None of this is sure, but it's our best bet at the moment.
It seems that right now, we're seeing a pause within a decline. It is possible that sideway trading will continue for a couple of days or even longer. On the other hand, we still think that there might be a significant slump in the near future. As such, the short-term outlook remains unchanged from yesterday and bearish.
Summing up, we still think short speculative positions are suited to the current environment.
Trading position (short-term, our opinion): short position, stop-loss at $257, take-profit at $153.