Bitcoin Buy Risk and Opportunities

The cryptoverse is awash in red, and it will not be over until there is some panic selling. Too many people are still too confident. On December 17, the author called the bitcoin top at $19,700 and closed all my longs. On December 20, the author called the bitcoin bear market here at BTCManager.

The $14,700 downside target was met, and we see buying opportunities around $10,000 but only if the trader is not already long at a higher price.

BTC-USDT (Poloniex, 1-hour)

This is a teachable moment to illustrate the dangers of bitcoin futures for newbies. The futures are leveraged. You put down only 47 percent down to go long a contract worth five bitcoins. Had you done so and gone long 72 hours ago around $20,000, you may have been forced to sell today or tomorrow around $10,000 when the floating loss approached your 47 percent margin. You would have been left empty-handed with no bitcoin and all your investment gone in a puff of smoke.

On the other hand, had you seen the Bitcoin Bear article on December 20 and gone short the futures, you would be celebrating your wealth today while others hodl.

This end of month and end of year crypto sell-off makes sense. Long-term stakeholders and traders are booking profits after a historic year. Charlee Lee sold all his litecoins, and the litecoin market tanked a day later. Surprise, surprise.

Fees remain very high across cryptocurrency exchanges. Ten to 20 percent above market quote. The only way people would pay such a high premium is if they expect to make it back via higher prices. High exchange fees are a clue that sentiment is bullish.

Bitcoin Cash Crash

BCH-USD (Bitstamp, 1-hour)

The volatility of bitcoin cash is a RedBull to Bitcoin’s cappuccino. Thinner markets make technical analysis signals less reliable. Bitcoin cash offers 8MB block size to bitcoin’s ~1MB.

This week, both Bitpay and Coinbase announced their adoption of this fork, providing the “fundamentals” behind the BCH price explosion to $4000. GDAX froze BCH at $9500, adding fuel to the fire.

Bitcoin Cash benefits from name confusion with bitcoin. Most people don’t know the difference between them, but the cheaper BCH price makes it more attractive.

Allegations of insider trading at Coinbase are probably true. At any rate, as per Metcalfe’s Law, greater adoption will lead to further price gains. This may be a good time to go long bitcoin cash and bitcoin gold. New bitcoin forks, Bitcoin God and Bitcoin Platinum, are scheduled very soon.

Disclosure: Daniel Bruno is a Chartered Market Technician and a graduate of the Said Business School at Oxford University. He maintains positions in cryptocurrencies and trades them for hedge funds.