Peering into the crystal ball

As I write this bitcoin is up over 1% and close to that resistance level I was looking at in my last post. This is a similar move to yesterday which then faded. Perhaps the same will happen today?

Heres a view of the chart with 1 day candles, on Bitstamp as usual.

As I’ve previously mentioned I think there are a few zones of horizontal support we’ll have to pass through if the bearish trend is to remain intact and we fail to pass through that red line. I’ve shown what I think are the main ones with blue dotted lines. If the down trend manages to continue until the bottom one when price reaches $400 that would mean about a month and half yet of further price fall and further consolidation until the bottom blue line and the red down trend lines cross at the start of May.

Heres a look at Bitstamp on a log chart. I don’t know why I don’t look at log charts more, some of you may remember the earlier days of my blog when I exclusively looked at log charts. I think log chart give the best picture of longer term and big picture views. Anyway here it is with 1 day candles, showing April and December 2013 bubbles.

I’ve marked what looks like a bit of a channel. The top of those blue lines I particularly like, it seems to bisect very neatly the bubbles which have appeared along the way. From this view it looks like Silk Road was the only event which managed to pierce the bottom of the trend, MtGox not really coming close. For a bit of fun and because its a while since I made any predictions I’m going to suggest that we will see a new all time high in bitcoins by the start of July this year. Some time after that it could get crazy. What will it feel like when bitcoins are rising and crashing by thousands in a day ?

14 thoughts on “Peering into the crystal ball

  1. For discussion purposes, what is the average return based on the slope of your log chart percentage wise? And would that conform with how fast interest in bitcoin is growing?

    What are some ways we can measure how fast bitcoin is growing in the real world (ie how many new investors are interested in purchasing bitcoin over time?) Also, how much is the average bitcoin investor vested in it at any given time (ie do they have most of their stack in it or most of it is still in cash)?

    I guess the last one would be hard to answer since bitcoin is anonymous so you can’t tell how much the average person has.

    I guess I’m just trying to put the fundamentals together with the technical analysis side of it.

    1. It’s an interesting Q for sure. The mtgox debacle wiped out some HUGE whales and also easily 500,000 investors! There is no easy coming back from that. Could be a while. Personally I got burned too. I’m waiting to see if there is any reasonable dip to buy in again, and if that never happens I might walk away.

      My opinion is that all the high risk appetite, techy/nerds, ~libertarians~, and those that invest time and energy in understanding new and abstract/scary things are already in bitcoin. I don’t think there are too many others to jump in except the masses that may not even know or be grossly misinformed. It’s hard to really expect any mainstream adoption when the foundation of bitcoin is sound money when the populace is indoctrinated to believe that inflationary fiat and debt financing is the way the economy works….

      Also Bitcoin is still WAY too far from being easy to use/understand and secure. I have not even mentioned it to anyone other than programmers/techies/nerd friends of mine, and these guys had all heard of it but just didn’t have the time to delve deeper on their own time.

      my 2 cents.

      1. I’m not sure i expect the next bubble to be driven by those who took it this far. The baton is passing to bigger fish. The masses will never profit before the big fish in bitcoin or anything else.

  2. I’ve gone long early. Ah well I’ll still be happy if price takes off again at some point.

    James those are interesting questions. Not sure how easy the answers are to find. Some people look at wallet downloads to gauge the number of people investing in bitcoin. That might be a good starting point.

    In free markets price should tell you everything you need to know, but is bitcoin market free? If it is it is almost unique. Most markets are manipulated through derivatives or futures with central planners painting it how they wish. Some say precious metals markets are not manipulated but in fact made up. Through HFT the price can be set anywhere, although fundamentals must constrain somewhere along the line.

  3. Afbitcoins, I agree, it will likely be the adoption by retail/maybe investment firms. Although I really struggle to believe that investment firms would get in given the risks of hacking/loss through data corruption and uncertain regulation…

    The catch 22 in my opinion is that the exchanges are the place where price finding and speculation happen and have allowed bitcoin to flourish but it is also these places that are the biggest targets for regulation, hackers, fraud internally or mismanagement. I’m very surprised that btc-e is still around given how they operate compared to mtgox to be honest. There is no transparency with any of the exchanges and reputation/track record in my opinion means so little with a technology such as bitcoin given how easy it is to fleece everyone and get away scot-free. Counter party risk is an understatement, but oddly enough without someone accepting it we don’t have a bitcoin with any value. (it’s funny to me that a thing designed to be decentralized and trustless such as bitcoin still depends on trust to discover it’s value)

    Since mtgox disappeared it seems people in general (people involved in bitcoin on reddit and few other hubs) think that the state of exchanges or the ecosystem as a whole is somehow healthier although nothing has changed. Crashes and thefts have happened repeatedly in the past and this is no different. In fact it may have been the proving ground for the simplicity of operating a fraud/fractional reserve/dying business of this unprecedented scale right under everyone’s nose, and (worst case scenario) could be a catalyst for more to come.

    The other really bothersome thing to me was the theory that was floated for a while of key corruption at mtgox and loss of the cold storage. The ease with which a tech glitch or human /technology mistake (even with redundancy) could lead to the total loss of assets that are unrecoverable, even if a historical recod exists (the block chain) that shows prior control of balance/wallet. There is no way to recover those assets even if clear evidence of immediate and prior control of those assets exists. That is terrifying to me. Knowing how fallible man is… let alone some of the silly mistakes that can be made at the corporate level.

    1. Hi Andrew, Yes there are big risks investing in bitcoin, I agree with what you’ve written. It is a new technology and although so far is going pretty well. (To me the thefts are a sign of how valued bitcoin is), like you say there is no regulation so people need to wise up and stop trusting websites of people whom they know very little about.

      For myself I cashed out a chunk of bitcoin during the time the last peak started collapsing. I am still in bitcoin, but lighter than before, and comfortable with that. To me bitcoin is high potential reward but very high risk too.

  4. I really like this gradual decline in the BTC price, telling us that we have drawn the downward sloping resistance line correctly.

    1. Hi James, yep that resistance is very clear. I’d like it more if I was still sitting on some fiat waiting to jump in. In my case I just have to be patient, hard to guess where the bottom will be. I have next horizontal support line at about $520. At the least I think we’ll probably be heading down to those levels now.

      1. Yep I’m only about 20% of the way in so looking to add a lot if it goes to $400 or lower.

    2. According to the log chart of the previous post, we would hit another support before reaching $400, wouldn’t we ?
      (that is in response of James but there was no Reply button ..)

      1. yes, I think there should be strong support at 400, but if it goes below that it’s back up the truck time (one can hope right?)

      2. If that log channel provides support it probably will be somewhere higher than $400, exactly what level support would be depends how long it takes to trend down that far.. Personally I think below $400 is unlikely..

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