Bitcoin Trading Alert originally sent to subscribers on June 27, 2016, 10:09 AM.
In short: speculative short positions, stop-loss at $657.
Brexit might be actually happening. This resulted in violent moves in financial markets. The British pound plummeted, gold went up and volatility was up. Bitcoin also witnessed a move to the upside. On Bloomberg, we read:
Demand surged for bitcoin as a safe haven from the British pound, which plummeted after the U.K. voted to leave the European Union.
The pound fell to its lowest in more than 30 years, driving demand for assets such as U.S. Treasuries and gold. Stocks and bonds also fell, amid concerns that the U.K.’s exit from the European Union could hurt the world’s economy. Bitcoin, a digital currency unconnected to any government or central bank, is often sought as a haven by holders of currencies that are declining, or that are not fully convertible, such as Chinese renminbi.
"A lot of people are buying Bitcoin for pounds and Euros,” said Jesse Powell, chief executive officer of San Francisco-based Kraken, the world’s largest bitcoin exchange in euro volume. “Our volume has doubled over the last 24 hours. We saw a huge spike in that market. People are looking for a safe place to keep their money, amidst all of this uncertainty.”
So, there was a sudden outburst of volatility in the markets. Is Bitcoin really driven by safe haven demand? It might be, but the action we saw in the Bitcoin market is not necessarily supportive of the view that Bitcoin is now primarily moved by the Brexit expectations. On Thursday and Friday, the move was up, the volume was relatively high, but not exactly the level one could expect in financial turmoil from a safe haven asset.
For now, let’s focus on the charts.
On BitStamp, we saw a bounce on Thursday and Friday. Recall our previous comments:
(…) we saw a decisive move to the upside over two days and on visibly larger volume – Friday and Saturday. Sunday was a day of action suggesting a possible reversal. The volume was weaker which also supported the reversal hint. Today, however, we’ve seen some appreciation, which is not a clear sign of a move down. From a short-term point of view, we are now in overbought territory, after a day of a possible reversal followed by appreciation on decreased volume. This is a bearish indication. For the time being, the fact that we are above the November 2015 high still makes the situation relatively risky. If we see a move back below this level, we might re-renter short positions.
Today, we’ve seen a move up (this is written around 11:30 a.m. ET). This doesn’t necessarily change the situation. The volume today has been lower than it was during the previous moves up. This is a moderately bearish indication. The RSI is now almost as overbought as it was in early November 2015. The situation is not yet bearish enough to get on the bearish side of the market.
The main difference now is that the market has put some time between the current price and the recent high without moving higher. This seems a bearish indication as Bitcoin hasn’t continued its march to the upside. On the other hand, the stagnation period is one with decreased volume. This might actually overturn the bearish conclusion. The picture is quite cloudy at the moment.
With the following swing to the upside being not particularly strong, we have a bearish hint. Additionally, Bitcoin failed to close far from its open on Saturday and moved down yesterday. This, too, are bearish hints.
On the long-term BTC-e chart, we see that the mid-June levels might actually be a top. Recall our previous alert:
We definitely saw a confirmation of a move to the downside. Both the magnitude and the volume of the move to the downside have been relatively significant. In fact, the volume on Tuesday, the second day of the decline and the first day of violent action, was the highest since January and visibly higher than on any of the days of the recent rally. Actually, the main question now is if the move hasn’t exhausted itself already. Our take is that it hasn’t as the RSI is still above 30 and we would like it to drop below this level before considering the situation oversold. We might see a pullback, however, in our opinion the situation remains bearish.
We actually saw a pullback coinciding with the Brexit vote. The action after the pullback has been moderately to the downside. It would seem now that the recent bounce up might have been a corrective upswing within a decline. This might be even truer given the fact that Brexit might have contributed to the swing up. As such, the situation now is still bearish, in spite of the recent upswing. On top of that, the RSI is still above 30, suggesting we haven’t hit oversold levels yet and there might be room for decline.
Summing up, in our opinion speculative short positions might be the way to go.
Trading position (short-term, our opinion): speculative short positions, stop-loss at $657.
Thank you.
Regards,
Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts
