A Market Timing Report based published Sunday, February 11th, 2018
I deliver focused comments on market timing once or twice a week. These are supplemented with daily “Tweets/StockTwits” (see links below). If you are not interested in bitcoin, see my latest post by scrolling down to the SP500 section HERE. Thank you.
UPDATE 2-14-2018: Bitcoin Testing the Upper Line of the Wedge
If it breaks UP, it can go much, much higher, but if the line holds, BTC can crash back to the lower market timing trend line or worse. The last time it overshot at the low end.
Must keep going up through that top line or else…
Back to the main issue….
Bitcoin is now once again going down, but could go straight up from here. That is the uncomfortable truth about the chart, which is still in a market timing down trend despite what seems an enormous bounce from the recent low to around 9,000 (on Bittrex; prices vary across exchanges). We are back down to 7911 as I type this. The “positive” aspect of the recent crash in value (of which bitcoin has seen many) is that it’s in a downward wedge, which is normally Bullish. But it’s also true that the base of the wedge should not be significantly violated, which it was about one week ago at the recent low. So I would not count on the chart formation to prevent a further fall. I would risk manage your position as I outlined last week HERE.
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My new post about the stock market, gold and interest rates will be out by Sunday at the latest. It’s been a volatile week to do market timing for bitcoin!
Before we get to the chart, I should mention the main impediments for recovery of bitcoin value that I see are problems with the “#SAUS Criteria for Cryptocurrency Success” that I’ve outlined earlier. The four criteria are HERE. The story has been sub-optimal lately with various governments taking shots at bitcoin, especially notably, India, South Korea, and much earlier, China.
The US meeting by the SEC and interested parties this past week was seen as a big positive, but the impact on the chart has mostly washed out. It was likely expected by all but gullible buyers, taking the bait in the down trend. If that meeting were in fact a big game changer, the upper trend line shown would have been broken to the upside. Instead, bitcoin is now falling to the lower trend line in the chart.
Otherwise, bitcoin has not quickly solved the problems with it’s use (I call that simply “Utility”), which include in large part the speed and ease of transactions. You cannot wait an hour to have your bitcoin transfer cleared while buying a cup of coffee and you cannot put up with having to do tax calculations on every coffee purchase with bitcoin, which is the case now in the U.S. Every sale for goods is a potentially taxable transaction. Any gain must be reported to the IRS, although they are happy if you don’t file for the losses.
Now many call bitcoin “digital gold,” but the problem with this idea is that there is nothing backing it. With gold, you have gold backing the GLD ETF for example (despite conspiracy theories). Gold has fallen a great deal such as from the peak of around $850 in 1980 (time of Jimmy Carter hyperinflation) to the low near the time of the 2000 tech crash (Aug. 1999 to be exact; gold was $252.05) and then gold rose to $1920.80 in 2011 and is now 1315.70), but you always had gold backing gold. Bitcoin is just an agreement by various parties to exchange it at a changing price.
Some may note gold can be volatile as well. Yes, gold can be very volatile after a long run. On 9-23-2011 after a massive multi-year Bull run, it fell 9.36%, and on 4-16-2013 it fell 11.34%, both in just one day. Bitcoin has moved 20-30% in a day by contrast. Something that has no real backing other than a mutual community agreement probably must be MORE stable in price than gold to work as “digital gold.” It’s not exactly a “Risk Off” asset if it can fall 25% in one day.
Bitcoin may not, but could easily fall through recent market timing support to a new low. Yes, it’s anyone’s guess and that is what the statements are out there – big guesses! Manage your bitcoin holdings accordingly and preserve your principle as best you can.
You can lose money on speculations, but you cannot lose 50% very often and make it back easily, as that takes a 100% GAIN to get back to even! Stop losses on cryptocurrencies are iffy because what would you do if bitcoin fell 50% while you were sleeping as it trades 24/7? If you lose as much as 50%, you MUST have a relatively small position size. For example, you could risk $500 perhaps and not have it be a difficulty for you. Or maybe your number is only $100-200. Invest and trade in any cryptocurrency according to what sort of loss you can sustain, and no more and never on margin or with credit card debt, in my opinion.
Right now the price is at 7,900 according to Siri and 7830 on Bittrex… (3:19 am ET). This chart I saved a few hours ago, but it gives you the layout…
Bitcoin is still in a down trend.
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Sun and Storm Investing Market Timing Blog™ 
I’m looking at crypto currency investments but I can stand the thought of linking anything to my bank account. I have a friend that’s playing it so I’m learning from him as well as my own study. Thank you for your insights on BITCOIN and the crypto currencies market!
Sure Charles. I’d only use “play money” that you would spend in Vegas. Some of the services are recommending investors put in small amounts of money of a couple hundred for a small investor and double that for a larger investor, which is a very crude guideline to be sure, but be prepared to lose it all and quickly take profits AFTER very big gains as I outlined.
With the recent blow up of the bitcoin chart, I would look at bitcoin as a pure speculation that could be supplanted by a competing cryptocurrency at any time. Sure it has some market share, but that is being degraded. Without solving their “Utility” problems as I described, bitcoin is very speculative. If they solved the issues quickly, THEN it would suddenly become more valuable and probably go to new all time highs. This assessment is similar to biotech companies that come up with a new drug that so vastly outperforms an existing drug to send the sales of the new drug skyrocketing and the old drug’s toward zero.
I demonstrated how to take profits recently with Ripple (XRP), and I’m riding the profits only at this point and will hold it through the swings, unless very negative news comes out about their implementation etc. I am not saying this is a good spot to speculate on Ripple, but rather, using it as an example of how to risk manage potential profits. It’s less useful to take out profits before you’ve seen a 100% gain at least, but it could work if you reinvest lower – to accrue very large gains that is.
Remember the more volatile something is, the more you should let the profits run until you can capture at least 100% of profits and 100% of principle and if you are very fortunate as I was with XRP, doing exactly that, while holding about 85% of the initial coins purchased. It went up that far and fast. You cannot book 200% on a position and hold most of it without extraordinary ramps in price, so adjust that to the situation and your risk tolerance. Also realize any cryptocurrency can go down by 25-50% while you are sleeping. They all trade 24/7.