Bitcoin (BTC)

$ 6409.31437908

Bitcoin Cash (BCH)

$ 0.3243831166

Ethereum (ETH)

$ 208.46393138

Ripple (XRP)

$ 425.584419503

Bitcoin Costs Stabilize Above $6K – But Will They Keep? Jim Chanos Is Out of His Depth Trashing Crypto Assets There&#039s A New Bitcoin Core in Town – And It&#039s Out to Troll Bitcoin Money Enjoy Decentralized Art at Satoshi’s Place Bitcoin and Manga Collide in Shonen Crypto Switzerland Rejects Pro-Crypto Sovereign Money Initiative Coinbase Announces Intended Support for Ethereum Classic
Homepage / News December 8, 2017 118 views

Trading Column `The Writing on the Wall´ – Shorting the Wonderful Bitcoin Bull

Trading Column `The Writing on the Wall´ – Shorting the Excellent Bitcoin Bull

Trading Column `The Writing on the Wall´ – Shorting the Great Bitcoin Bull


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.

Also read:&nbspTrading Column `The Writing on the Wall´ – What Will CME Bitcoin Futures Do to the Value?

Trading Column `The Writing on the Wall´ – Shorting the Great Bitcoin Bull

Shorting The Excellent Bitcoin Bull

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&nbspanalysis 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 &amp Shoulders Pattern

Trading Column `The Writing on the Wall´ – Shorting the Great Bitcoin Bull

The Head &amp Shoulders Pattern (H&ampS) is a pattern described on Investopedia&nbspas 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&ampS 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.

Trading Column `The Writing on the Wall´ – Shorting the Great Bitcoin Bull
Source: BitcoinWisdom

As we can see in the graph above, a H&ampS 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& 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.”

Pictures courtesy of Shutterstock, Pixabay.

Want to calculate your bitcoin holdings? Verify our&nbsptools&nbspsection.

Published at Fri, 08 Dec 2017 21:00:29 +0000