What is it? How does it work? Is it here to stay? How far can it go?
Answering the first two questions is fairly routine, answering the third and fourth questions is anything but.
So what is BITCOIN?
In August 2008 the domain name Bitcoin.org was registered with a link to Satoshi Nakamoto (almost certainly a pseudonym) and in January 2009 the first Bitcoin network was established. This network used blockchain technology to encrypt transactions and allow the transfer of encrypted data between members of the closed network. Financial transactions used the Bitcoin as the cryptocurrency to use for these exchanges. BITCOIN therefore is a financial asset that uses cryptography to control its creation and management and bypasses the need for central authority intervention.
The question as to whether it is here to stay has probably been answered. It is here to stay. However, it has a long way to go before being universally accepted and regulation will most likely impact on its future but BITCOIN and the host of other cryprtocurrencies will not be going away anytime soon.
So the immediate question is how far can it go before the current bubble bursts.? That BITCOIN is in a bubble is not in doubt. The question is whether the bubble will be popped or deflated gradually. From a technical standpoint is it very difficult without a crystal ball to say where we are headed with BITCOIN making news highs every day. We have no history, no support lines , no resistance lines. Relative Strength readings are as overbought as they can be with the monthly RSI reading in excess of 94. These levels are unsustainable so one of two things will happen. Either the price will begin to move sideways whilst overbought studies unwind or the price will crash as it has previously done.
History does suggest the latter is the more likely outcome.
If the price does crash, this may be triggered by news, the threat of regulation, market exhaustion or a myriad of other reasons.
Fibonacci may hold the key.
In the diagram below, the different Fibonacci levels have been respected. In other words the 23.6 level was met and the price reversed. Price has hit the different Fibonacci levels and the market has reacted.
This particular Fibonacci patterns suggest that at 2 (200%) which is at 9750, there is likely to be a market reaction. What that reaction will be is anyone’s guess but I shall be placing a SELL STOP order at 9750 with a stop somewhere above.