Thursday, February 22, 2018

I Think I'm Going To Say I Got This One Right

Back on January 10th, I did a piece on Bitcoin being in a bubble asking rhetorically if it was really a bubble.  I concluded:
I think that yes, it's in a short term overpriced situation.  I think it's possible, even likely, that there needs to be some period of sitting in a trading range and consolidating (strangely, I run across this guy saying the same thing).  People need to settle down a little get some of the fever out of the market.  I think a drop in price of as much as 50% is not out of the question.  However, I also think it has a good future; that there's a real place for cryptocurrencies and they will make a comeback.
We all know that Bitcoin crashed after that.  In fact, according to Coinbase, Bitcoin was already in the process of crashing on Jan. 10; it reached its peak on December 16th, at $19,343.  They show the price bottoming out on February 5th at $6914, which is well under 50% of the peak (35.7% of the peak).  Today, it's trading in the range of $10,000, which is on the order of 51.7% of the December peak, so still off about 50%. 

Is the bloodletting over?  This is harder to say, but playing technical analyst a bit, here's the last month of closing prices with a trading range I've drawn in. 
The decline is obvious, as is a turnaround after the Feb. 5th minimum.  The price has been pretty well confined by that increasing price channel - until this morning to be precise.  The next few days will probably tell the tale of whether or not this is a "dead cat bounce" and the price will drop some more, or if that bottom line is close to a "support line" that the price doesn't go below and it continues back up.  It's entirely possible it stays in a trading range around $10,000 for a longer time (six months?) before going up or down.

Remember my definition of technical analysis: drawing lines on a chart of prices and then thinking those lines mean something.  

Bitcoin remains an interesting puzzle.  Right now, it seems disconnected from its real intent, but I still think cryptocurrencies do have their place in the long term, big picture.  I firmly believe that there will never again be the equivalent of the increase in price from the legendary first pizza order (10,000 coins for 2 pizzas - now $100 Million), but that an increase from the price paid today is entirely possible.  Now much?  I have nothing to base that on but gut feel, which I'm clearly no good at (if I was good, I would have bought bit coins when they were a few bucks).  If you're looking for the next big shot at making thousands of percent gains, look somewhere else, but gains more like other investments are still possible.


  1. I think some future cryptocurrency, not the current bitcoin, will be the best way to downsize government. Once some group is seen to be getting away with not paying taxes, there will be a rush to join it so individuals don't feel like suckers.

    The biggest threat to the value of bitcoin is bitcoin 2.0.

    1. Wikipedia says that as of January 1st, there's more than 1380 cryptocurrencies. Any of those could unseat Bitcoin - or it could be one that doesn't exist now. Or it could be none of them and Bitcoin reigns supreme.

      Likewise, any of those could get Hot in the market and skyrocket in price. Or not.

      I'd love more insight than that, because it's practically useless, but none so far.

    2. The feature that I'd like to see is a mint mark. Then you could promise to trade one SiGbCoin-minted coin for one silver dime, and the coins would become warehouse receipts. Maybe you'd only issue 100 coins. Reputation systems and escrow would appear, and warehouses would rapidly coalesce.

      Cryptocurrencies only do the communication function of money, not the value storage. There's no reason for the coins to increase in value. Do you save the temporary crypto keys that SSL makes? The crypto is just an engineering implementation to make the transfer happen securely.