Bitcoin is conquering the currency markets
The Bitcoin story is probably the most exciting stock market story in many years - maybe even in the past decade. Many old stock marketers see Bitcoin as just another mania and exaggeration. Meanwhile, I believe that Bitcoin development is unstoppable. I admit that for a long time I was not a friend of cryptocurrencies. My main argument was that every currency should be backed by a state. This is an important feature because paper money is made of paper only. Only the protection by a state gives the piece of paper a real numerical value.
It is precisely this protection argument that the cryptocurrencies question. Why does a currency have to be secured by the state? Gold is so valuable because it is accepted worldwide, and this is also the case with Bitcoin.
As the currency history shows, there is no real currency that could have a long lifespan. Unless we're talking about gold as a currency replacement. Gold has the property that it cannot be reproduced at will. Gold would be a bit cumbersome to handle in daily trading.
Cryptocurrencies could come into this gap. Like gold, a cryptocurrency, such as Bitcoin, cannot be multiplied at will. The reason is blockchain technology. Without going into the exact technological properties now, it is sufficient to know that the technology is decentralized and tamper-proof. An unlimited increase of bitcoins is not possible.
There is no central bank for the Bitcoin. Bitcoin multiplies to a limited extent based on mathematical formulas. The technology does not belong to any person or state. It is freely available. Cryptocurrencies are traded on special trading venues. The currently largest trading venues are Bitcoin.de or Coinbase.com.
Bitcoin is the best-known cryptocurrency and therefore the showpiece. However, there are now several 100 digital currencies of this type. The number 2 in the market is Ethereum. It is a little less known, but technologically more flexible than Bitcoin. All cryptocurrencies are fighting each other, and only the best will prevail. Bitcoin and Ethereum will probably prevail.
Cryptocurrencies have become firmly established
Bitcoin technology is so good that central banks and bankers from all countries see a danger to conventional currencies. As a result, critical bankers are trying to demonize Bitcoin. You talk about a short hype and a stock market mania, comparable to the tulip mania in the 17th century. At that time, tulip bulbs were traded at horrific prices. However, because a tulip bulb is just a plant, there was a bad awakening at some point. The course collapsed and ruined many owners.
With cryptocurrencies, one can speak of a real competition of the currencies. Therefore, the one who makes the most cryptocurrency money will bet on the right currency. It is already foreseeable that cryptocurrencies are a serious alternative to normal currencies. The illegal trade in drugs or weapons on the Darknet is firmly in the hands of cryptocurrencies. As long as bitcoin is accepted there, it becomes more and more important in the legal world.
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Central banks destroy their own currency
With the inflationary use of traditional currencies, all central banks build their own graves. The euro is a good example of this. The constant manipulation of the key interest rate with deliberate inflation should reduce debt. It is always debt that was caused by politicians in the past.
Which state is really debt-free? There are only five small states worldwide with this property. All other countries live above their means. This creates a constant build-up of debt. This goes well until it becomes insolvent.
Many politicians (especially left-wing ones) actually believe in their overconfidence that they can achieve control over the financial markets. It never worked. The state is and has always been a bad money manager. Herein lies the great opportunity of bitcoin and other cryptocurrencies.
Manipulations possible by bankers
Bankers now see a great danger for traditional currencies. Therefore, there are increasing critical and manipulative voices that describe Bitcoin as fraud. The most recent example is Jamie Dimon from the US bank JP Morgan. The price of bitcoin has almost quintupled since the beginning of the year. The record high was $ 4,980. Certainly, a rapid increase in Bitcoin value, but is the price actually too high? There are 16.6 million bitcoins in circulation. Multiplied by the maximum, the maximum monetary value was approximately $ 82 billion. In comparison to the current assets of other major currencies, this hardly matters. Bitcoin therefore still has considerable potential for growth.
It is becoming increasingly clear that Bitcoin is not a fad. The concept of anonymous currency without government control is powerful. Sooner or later, an established central bank will probably even set up its own cryptocurrency. With the security of a state, a perfect symbiosis could arise.
The development of cryptocurrencies as a competitor is unstoppable. The greatest danger only comes from the states themselves. If several states campaign to ban cryptocurrencies, this could lead to a market collapse.
A first example of this could be observed in China. The Chinese bitcoin exchange Huobi was closed. Interestingly, Chinese Bitcoin traders immediately came up with an alternative. The trade takes place anyway. P2P platforms located outside of China serve as a replacement.
Technical situation of the Bitcoin
Long-term analysis must be handled with care. Bitcoin has had price data for a number of years, but it contains significant fluctuations in trading volume. Basically, the technical analysis works best when many market participants are involved in trading. This has only been the case for around two years.
Image: Bitcoin USD weekly chart
As you can see in the upper chart, Bitcoin has a rapid pace against the US dollar in 2017 Rally put down. The trend is rising steeply. Maybe too steep! A violent increase in dynamics automatically leads to volatile movements. Therefore, as a trader, you can be sure that the next downward wave will wipe out a large part of the previous price gains. This is the stock exchange normality.
Note the MACD indicator below. He is on the brink of a bearish reversal. The reversal could trigger a short-term panic. However, the upward momentum is so strong that the next upward wave will not be long in coming. The MACD shows two strong peaks in its histogram. The second peak is higher than the first. It can be seen as a bullish sign.
In summary, it can be said that the course of the course is preparing for lower courses. A breakdown is not likely because the movement should be intercepted by the upward trend.
The next chart shows you how the future trend is most likely.
Image: Daily chart of the Bitcoin-USD
The upper chart shows a striking pattern from the area of Elliottwave analysis. It is an A-B-C pattern that the Elliottwaver call "Flat". The pattern consists of three waves. An upward wave a followed by the downward wave b and finally an upward wave c. The flat usually has a high power and in this case it is directed downwards. Of course, an Elliottwave analysis cannot predict the future with 100% certainty. However, one can assume that many Elliot weavers recognize the pattern and take a short position accordingly.
The middle indicator is the well-known On-Balance-Volume (OBV). It supports the assumption that the market is on the verge of another downward movement. Compare the highs of the course and those of the OBV. The bearish volume divergence confirms the bearish flat. The OBV showed little purchasing power in the upward direction, and now remains almost level. It indicates that buyers are holding back.
Image: Bitcoin USD daily chart with price targets
The upper chart shows the price targets for a possible one again short position. If all goes well, the price should fall back to at least $ 3,600. The final price target is $ 3000 because of the strong support there. The target price is thus chosen low. It assumes that the force of the flat pattern described is fully effective. In any case, the interim goal of $ 3,600 should be reached. In this respect, the intermediate goal is a kind of insurance, should the downward momentum slow down.
However, because Bitcoin is moving in the long-term upward trend, a short trade must be provided with a stop loss. I set this at $ 4,550.
It is important to note the stopover and target price. Both are technical support. After reaching one of these values, a bullish reversal pattern could develop. In this case, the upward trend gains new momentum. For determined traders, there is even the chance to immediately turn the short position. However, this requires a separate needs analysis.
Implementation of the trading recommendation with target prices:
Price information for Bitcoin USD Price target: US $ 3000, intermediate goal: $ 3,600 Stop Loss: $ 4,550
If you would like to benefit from the short-term stock recommendation, you can buy the stock directly or work with derivatives. Note that derivatives include leverage and therefore increase the profit and loss potential. In extreme cases, a total loss is even possible.
Stop loss: The stop loss is initially set as an initial stop and has the function of a maximum loss limitation.
Price target: The price target is the Exit point for the forecasted market movement.
Stopover: When the stopover is reached, the position is in profit. At this point we take a partial profit and we sell 50% of our position. At the same time, the stop loss is adjusted to the personal entry price. This enables us to close our position without loss, even if the market later turns against us.