Bitcoin Trading Alert originally published on April 10, 2015, 10:26 AM.
In short: speculative short positions, stop-loss at 283, take-profit at $153.
Samsung is partnering with IBM to work on new potential applications for the technology underlying Bitcoin - the blockchain, we read on Bloomberg:
Samsung Electronics Co. is working with International Business Machines Corp. to use bitcoin technology for new applications.
While bitcoin's price has almost halved in the past year and the prospects for the digital currency are uncertain, its underlying software is attracting companies like phone makers, carriers and banks. That's because the technology can be tweaked to record changes in ownership of any asset in a public ledger using a distributed network of computers or mobile phones. It could help facilitate all types of online transactions.
Samsung Research America, a division based in Silicon Valley, has researchers looking at using the so-called bitcoin blockchain to design better ways to verify "that what you say is authentic is authentic," said Steven Rahman, director of strategy at the research division.
"The blockchain technology is very interesting in general, and it can be applied in a lot of areas," Rahman said. "Currency, it's just the first use case. You could imagine that anything, like prescriptions, could be managed with the blockchain technology."
Samsung Research America usually develops technologies that may be used in commercial products in two to five years, he said, declining to provide further details about the bitcoin project.
This is representative of the trend we might see in the next couple of years. Big names like Samsung and IBM are entering the space and looking into how Bitcoin technology might be of use to them. This also means that research into Bitcoin-based solutions might translate into features that would be used in products we already know. For instance, it could be possible that Bitcoin or Bitcoin-based protocols could be incorporated into new Samsung apps or devices.
The potential applications of the blockchain might not to be limited to transmitting money. This is something Bitcoin enthusiasts have known about for a long time. The difference now is that mature companies seem to be waking up to the possibility of using the underlying technology to confirm ownership or the state of records. The briefly mentioned idea to use the blockchain technology to validate prescriptions is simply one of such less than obvious potential applications of the ledger mechanism.
For now let's focus on the charts.
On BitStamp, yesterday we saw a second close back below $250 (green line in the chart). The volume was lower than on the preceding day but not very low altogether. Bitcoin even went below $240 but retraced later on. Our comments from two days back are still up to date:
(...) At first sight, this [the recent action] might look like a bullish development. But is it? We actually have our doubts. Yes, Bitcoin went as high as above $260 but the volume levels were far from significant. Yes, Bitcoin closed above $250 for six days in a row, but this didn't result in a stronger move up.
Perhaps the most suggestive hint comes from how the cryptocurrency has been trading today. Bitcoin went down, below $250 and has been trading below this level since. The volume is already higher than it was yesterday. This is still not a conclusive level of volume but it seems that there might be more selling than buying power in the market.
Taking into account the fact that we saw a couple of signs usually linked to declines but no declines materialized and that the outcome has so far been to the downside, it seems that we might be in for more depreciation.
Today, the volume is already higher than yesterday at the close and Bitcoin has moved down once again (this is written around 10:00 a.m. ET). At one point during the day, Bitcoin even hit $231. Does this mean that we're now seeing the beginning of the next big move? We might, but the current action is still not pronounced enough to claim that. One way or another, Bitcoin has been moving down and the previous bearish outlook has just become even more bearish.
On the long-term BTC-e chart, we see Bitcoin below $250 (green line in the chart) and well below a possible rising trend line. Today, Bitcoin went down as low as to $231 and has stayed around this level since. The volume is not really very high so this might still not be the move that could take Bitcoin down to around $200 (dashed red line in the chart), but we might not have to wait for such a move much longer.
As with any market, there are no sure bets but Bitcoin is now in an even more bearish situation than it was a couple of days ago. The currency is below a possible rising trend line, in recent days we saw a test of the $250 level followed by a move back down and Bitcoin is currently depreciating. All this reads as a pretty bearish environment. Quite importantly, the current move down hasn't been strong enough to really push Bitcoin into oversold territory. In other words, Bitcoin still has room for declines, in our opinion.
Summing up, in our opinion speculative short positions might be the way to go now.
Trading position (short-term, our opinion): short, stop-loss at 283, take-profit at $153.