Bitcoin Trading Alert originally sent to subscribers on October 3, 2014, 8:22 AM.

In short: long speculative positions, target at $500, stop-loss at $337.

Bill Gates, founder of Microsoft, has expressed his views on Bitcoin saying that the currency was “exciting” him:

Bitcoin is exciting because it shows how cheap it can be. Bitcoin is better than currency in that you don’t have to be physically in the same place and of course for large transactions currency can get pretty inconvenient. The customers we’re talking about aren’t trying to be anonymous. You know they’re willing to be known so the Bitcoin technology is key and you could add to it or you could build a similar technology where there’s enough attribution that people feel comfortable this is nothing to do with terrorism or any type of money laundering.

This comment exposes the serious advantage of the system, which lies in providing frictionless payments without the need for physical coins, but also one of the possibly most important hurdles on the way – the perception of the currency among the general audience. While the headlines seem to have somewhat changed, with more attention being drawn to Bitcoin startups and less to people using the currency for criminal purposes, there still is important work to be done, both in regulating the currency and in improving its security.

These developments are already underway and startups are working on both security measures and enhancements which would make Bitcoin more appealing to people who don’t necessarily want to get into the technicalities, just would prefer to pay in a simple, streamlined way.

Having said that, let’s turn to today’s charts.

Yesterday, Bitcoin went down on BitStamp, erasing most of Wednesday’s gains. The volume picked up late in the day but, overall, it still didn’t match what we had seen the day before. While there was depreciation it wasn’t particularly strong and Bitcoin ened the day around $375 (the solid red line in the chart).

Today, the action has been weak (this is written after 7:45 a.m. ET), both in terms of the exchange rate changes and volume (the day is far from over, mind). Based on what we know so far, the short-term outlook remains unchanged and our yesterday’s comments are up to date:

(…) we saw a move down yesterday. It erased some of Wednesday’s gains. The volume was similar to what we had seen on Wednesday. Overall, the move felt like it was not negligible but not strong enough to change the short-term outlook.

Today, we’ve seen some more depreciation (this is written after 10:30 a.m. ET) and Bitcoin has now erased most of Wednesday’s gains. However, it has done so on possibly depressed volume (the day is not over yet, though).

Overall, the move down isn’t strong and there’s no confirmation in volume. This suggests that it might not be as significant as might seem at first sight.

On the long-term BTC-e chart, we haven’t seen much change since yesterday. There is one divergence between what we’ve seen on BTC-e and BitStamp, however. The volume on BTC-e has been somewhat stronger (in relative terms) than on BitStamp. Since there has been no confirmation as the exchange rate has been relatively flat, we view this as a thing worth monitoring but not yet significant.

Overall, the situation now is that Bitcoin has been consolidating, a point we highlighted yesterday:

Bitcoin is now consolidating between $350 and $400. The next more significant move might start when Bitcoin breaks out of this range. At present is seems to us that the currency might still move lower, to $350 or even slightly below but our bet is that it would come back from this level and possibly launch a rally.

This is still very much the case and might be even more the case if volume subsides in the next day or days. A move down might unfold but might be followed by a strong rally.

Summing up, in our opinion long speculative positions might be the way to go now.

Trading position (short-term, our opinion): long, target at $500, stop-loss at $337.

Thank you.

Regards,

Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts