This is a weekly trading tips series referred to as ’Writing On The Wall’, in which our game theory guide, Eric Wall, tries to decipher those writings. This week, shorting bitcoin.
I absolutely abhor getting to quick bitcoin. As a long-term believer in bitcoin, it goes very much against my beliefs to brief what I think about to be the very best and most undervalued economic asset in the world. Moreover, when the value is constantly producing new all-time highs, there are no metrics, indicators or tools that can be utilized to reliably estimate resistance levels or reversal points. Calling the prime is basically a guessing game. Consequently I usually keep away from shorting bitcoin at all price, except for under very uncommon and extreme situations.
As I have reasoned in my previous posts on this topic, the phenomenal bull run bitcoin has had because $6,500 might have been mainly driven by the idea of bitcoin as an emerging asset class, where retail investors have been presented with the awesome opportunity of getting in just prior to Wall Street does. Even though analysis tells me that the CME (and even far more so Cboe) bitcoin futures comprises a net constructive for the value of bitcoin, I don’t think the full effects of it will be instantly visible on launch day (ten Dec for Cboe, 18 Dec for CME). Listing the instrument on an exchange is only the 1st step there are other hurdles that will want to be crossed ahead of the instruments can be traded. For instance, it needs the clearing firms of the clearinghouse to clear the instruments for its consumers and brokerages to supply them to finish-investors. For the institutional investors, there is generally some selection making process and danger analysis that needs to be carried out ahead of they can invest. With the Cboe announcing their launch date only a week ago, I discover it extremely unlikely that they will dominate the global bitcoin market on the initial week of trading. What should have a a lot bigger short-term influence on the price is the sudden disappearance of retail buyers jumping on the idea of acquiring-in ahead of Wall Street.
Now, at $ten,000, this wouldn’t have been adequate for me to enter a sizeable short position on the greatest financial asset of all time. Nonetheless, if you add yet another $six,000+ in significantly less than a week and the reality that we’re going into a weekend (when no new fiat can hit the exchanges) to the mix, the desire to at least reduce my exposure to bitcoin temporarily becomes too intense to pass up. Observing the current extreme volatility, it is really clear to me that the marketplace is overheated and could collapse for even lesser causes than the ones I’ve detailed. Nonetheless, promoting a chunk of bitcoin at a spot exchange is not a really attractive option due to taxation and custodial risk. The other selection is getting into a leveraged short position, which permits you to decrease your exposure with no leaving practically as significantly funds on an exchange. As such, I’ve decided to quick the Wonderful Bitcoin Bull.
Shorting on Bitmex comes with a price limit at which you get forcibly liquidated, so the timing is really delicate. It is then not very helpful that the cost is really volatile. As I mentioned earlier, calling the top with precision is mainly guesswork, however nonetheless really essential. Maybe that can explain why so several traders seek help by seeking for special clues in the patterns of the graphs to aid with this essential task–the art known as technical analysis.
The Head & Shoulders Pattern (H&S) is a pattern described on Investopedia as a “specific chart formation that predicts a bullish-to-bearish trend reversal” and that it “is believed to be one particular of the most trustworthy trend reversal patterns”. Note the word “believed” in the latter sentence technical analysis is not empirically verified. Nevertheless, the H&S pattern is a single of the most frequently mentioned indicators on /r/BitcoinMarkets, and is generally used by a lot of technical bitcoin traders. As such, it stands to reason that the formation of such a pattern could be a self-fulfilling prophecy in the sense that it can lead to a psychological trick which causes traders to trigger the price movement they were predicting, and might be the trigger that bursts a bubble that for other factors was currently bursting.
As we can see in the graph above, a H&S pattern has formed for bitcoin. Regardless of whether or not this truly is a meaningful indicator to trade by is not yet established, but for me, this is an as very good an exit point as any. I entered a sizeable short position at the value of $16,236.40 on Bitmex, a handful of hours following the pattern was formed on the graph above. The market place in the course of this weekend will possibly be exceptionally shaky, so it is very best to try to not to appear also much at the price in order to keep away from obtaining scared out of one’s position. Set your stop losses, and could the gods be ever in your favor.
Do you feel shorting bitcoin? Let us know in the comments section below.
Disclaimer: Bitcoin price tag articles and markets updates are intended for informational purposes only and need to not to be deemed as trading guidance. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate choice to conduct a trade is created by the reader. Constantly remember that only these in possession of the private keys are in manage of the “money.”
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Published at Fri, 08 Dec 2017 21:00:29 +0000