Bitcoin Trading Alert originally sent to subscribers on December 12, 2016, 11:42 AM.
In short: no speculative positions.
Bitcoin has made progress in the couple of years since it became known to more than just a handful of users. On the other hand, it certainly seems that the currency is very far from being a mainstream payment channel. On CoinDesk, we read:
And yet, years later, the giants of the remittance market are far from slain, despite the average fees of 7.5%, and the growing crisis of bank "de-risking" – strategically refusing to process transfers to or from regions considered to present a high risk of money laundering, terrorism or other illegal activities.
(...)
The first thing that caused over-optimism in regards to bitcoin's potential was a belief that tiny transaction fees would translate into low-cost remittance processing.
While the low bitcoin transaction fees represent the cost of actually processing a payment, many companies in the bitcoin space have found that the technical costs are often trivial compared to the regulatory ones.
In fact, even established players can struggle with the cost of compliance. In 2013, Western Union took a hit to profit margins as a result of the investment needed to keep up with new and existing regulations, and even its increased focus on digital payments rather than cash transfers has brought mixed results in the years since.
So, for newcomers to the field without such deep pockets, the barriers to starting out can be prohibitive.
It turns out that setting up a Bitcoin wallet is not everything companies willing to transfer Bitcoin have to do. In general, in a landscape where the laws for Bitcoin are actually not set in many countries, it is extremely challenging to navigate the legal implications of various actions. Even if the rules are relatively clear, the second problem kicks in – Bitcoin companies are required to maintain procedures in place, such as AML. The setting up of the appropriate systems and keeping them running at all times might be both time- and capital intensive. This might stop a lot companies from entering the Bitcoin market.
At the same time, even if Bitcoin is not set to become a widespread payment system, it already has enjoyed some success, for instance, in the Philippines. It seems that Bitcoin might not take the world of payments by storm, however, various ledger systems based on Bitcoin are increasingly probable to become parts of the global payment system.
For now, let’s focus on the charts.
Bitcoin went up some more in the last couple of days. The move was not strong by any standards. Does this mean that the appreciation is over? First, let’s recall our recent comments:
[The recent events] were followed by more appreciation and an uptick in volume which was not extremely significant, though. The Friday move ended near $775 – precisely the level we have been mentioning for some time now. This doesn’t necessarily mean that the move is already over, however, it shows that $775 might in fact be a strong resistance and the odds might be tilting in favor of a bearish outlook.
The fact that we saw more appreciation yesterday and that the move today has been to the upside so far (...) suggests that a breakout above $750 is very close to being confirmed. This would be a relatively bullish development, however, not one to call home about. This is because $775 is quite close and it might prove to be a far more important resistance level.
The situation now is even a bit closer to $775, which means that the environment is even more tense than it was when our previous alert was sent out. Today has been a day of appreciation (this is written around 11:00 a.m. ET), which doesn’t change much. In particular, we haven’t seen a move above $775. Secondly, the volume seems to be slightly lower than during the previous upswings.
On the long-term BTC-e chart, there have been no changes either. At least no meaningful ones. Recall our recent comments:
Now a move above $750 is almost confirmed. At this moment, an attempt at $775 seems quite likely. At the same time, the scope of the move seems somewhat limited and the possibility of a quick reversal is something to be reckoned with. In these circumstances, in our opinion, it might be best to wait out the possible volatile reversal and get in, possibly on the short side, unless we see a more substantial move above $775.
We are seeing a possible attempt at $775 as we are writing these words. This means that, depending on the behavior of market participants in the next couple of days (or even hours), we might see an important resistance level being broken or, conversely, a sharp reversal from this level. We consider the second option more likely, however, the risk now is still too great to put on a hypothetical short position. We could see a violent upswing from here before the reversal. What’s the bearish indication here? We’re close to, or already above the previous high, depending on the exchange, so the resistance level comes into play now. At the same time, Bitcoin is already relatively overbought. The last time it was this overbought was in June 2016. Also, in most cases with such levels reached since 2013, it was the local top that was being telegraphed. In our opinion, this is quite possibly the case right now.
Summing up, in our opinion not having speculative positions might be favorable at the moment.
Trading position (short-term, our opinion): no positions.
Thank you.
Regards,
Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts
