Bitcoin busted some serious moves last week, crashing by over 40% at one point before traders (or speculators) sensed a buying opportunity and lapped it up back above US$5,000. At its lowest point, Bitcoin was trading at around US$3,800.
There are as many “explanations” for the precipitous fall of Bitcoin as there are decentralized nodes for the cryptocurrency. One theory has it that over last weekend, fraudsters from PlusToken, an infamous Ponzi scheme perpetrated in China and South Korea and which fleeced investors of over US$2 billion, moved 13,000 Bitcoins into “mixers” to get ready to dump them onto cryptocurrency exchanges to sell them. Another theory has it that Bitcoin crashed alongside much of the broader market, with stocks, bonds and get this, even gold, plummeting.
To be sure, the world is in an entirely new phase and these are unprecedented times. Is there even such a thing anymore as a “safe haven asset”? Whatever a “safe haven asset” means to you – Bitcoin is not it. And for all attempts to fit Bitcoin’s curve to correlate with gold, it’s alleged physical cousin, there simply isn’t enough data to support such a correlation. As a nascent asset, Bitcoin specifically and cryptocurrencies, in general, will always be subject to the worst of market behavior, including manipulation, pump and dump as well as panic and euphoria.
Looking ahead, with the U.S. Federal Reserve slashing rates to near-zero and with a general sense in the investment landscape that central banks will move to “normalize” markets, investors are likely to take both sides of trades, with equivalent numbers betting that Bitcoin will go up and go down. What this means is that the most profitable trades are to be had by trading inter-day volatility. When volatility indicators point towards increased intraday volatility – get out. Be disciplined and cap trades according to preset performance targets and don’t let long-biased winner run.
There’s more reason for Bitcoin downside risk than upside and even the upcoming halving will be insufficient reason to raise Bitcoin in the face of overall market malaise. Instead, Bitcoin ought to resume rangebound trading again at relatively medium volumes, higher than pre-March volumes but far lower than the first two weeks of this month.
Are there other value plays? Pay attention to Bitcoin Satoshi’s Vision again. I have repeated calls to disregard the ideology and politics behind this coin time and time again and focus instead on profitability. Look for entry opportunity for BSV between US$80 to US$90 and exit anything above US$150 for a tidy trade – don’t let winners ride on this one. The downside risk on this trade is relatively low. Cut losses at US$60. Meanwhile keep calm, crypto and clean hands.
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