Always consider hidden risks
BITCOIN: A Perfect Storm?
August 04 2016 ( TradingView )
As the Cryptocurrency market continue to emerge as it may
become eventually one serious alternative to the paper money
as we know, it still face some serious challenge. The main known
Cryptocurrency is BITCOIN.
A Perfect Storm has left market participants in disarray in the
BITCOIN market as huge price shifts occured in the past week
as a few bad news hit the tape...
On July 25 2016, the British Columbia Government announced
that Foreign Buyers will have to pay an extra 15 per cent in
property tax fees on residential real estate in Metro Vancouver
to try to cool the already over heated market.
You may ask what is the link between the BITCOIN market and
the real estate in the Metro Vancouver... As few of us realize that
the BITCOIN market is in reality mainly traded in China; in July,
the top five exchanges (Chinese) accounts for over 96 percent of
all BITCOIN trading. As the main Foreign Buyers in the Metro Vancouver real estate are Chinese, they need to take a quick decision to buy rush the real estate or to liquidate some BITCOIN positions....
On July 27, a Dovish FOMC weakened the US Dollar against its majors peers including the BITCOIN Cryptocurrency, another shot across the bow...
On July 31, BITCOIN broke a Major Support Trendline within a huge compression technical pattern that started since June 7 2016. It did break in a violent and volatile trading environment typical of those compression patterns (lower highs and higher lows). (See chart Below - Red Trendline - Ellipse)And finally, on August 2, it has been reported that the major Cryptocurrency exchange, Bitfinex, was hacked;a fraud worth over 70M US$ on that BITCOIN exchange. From peak price reached on July 31 to the Bottom price price reached on August 2, BITCOIN price moved by 26.4%!What puzzle me is that people keep investing into Cryptocurrencies, Mainly BITCOIN: it is still quite an illiquid market, also a fragmented market with potential hacking risks, the market behavior is mainly according to Chinese participants behavior and pure virtual currency as no asset is backing it...A better alternative seems to me is BITGOLD (a Canadian Company): it is a more liquid market as gold is a mature market, hacking risks is a lot lower as a centralize market player, gold market is a broad world market and makes that Cryptocurrency a Hard Currency because it is backed by a real physical asset...Not only the Gold standard is more secure, it is also a lot less volatile than any Cryptocurrencies as shown by the chart below. So let s think about it!
Daily Candles Chart
Top Chart: BITCOIN ( BTCUSD - Coinbase )
Historical Volatility ( Blue Line)
Bottom Chart: Gold price ( in US Dollar )
Historical Volatility ( Blue Line )