Cryptocurrencies, Investments

Cryptocurrencies: The Bubble continues, even higher?

October 09, 2017

Cryptocurrencies: The Bubble continues, even higher?

In my earlier post in September, I wrote about the popping of the Cryptocurrencies bubbles, that the Bitcoin charts had appeared to me as if it was going into a reversal pattern. Needless to say, the markets once again proven that it has its own mind, and that as a student of the markets, one has to remain humble.

Some had written or spoke to me about their take of the Bitcoins and digital coins, some agreed with my interpretation while some disagreed. I think it is a healthy discussion and one has to remain open minded about the evolving state of things. Even Goldman Sachs has a different view from Jamie Dimon, when it comes to Bitcoins and Cryptocurrencies!

The market is still divided on cryptocurrencies, with the government of South Korea being the latest authorities to join the “ban cryptocurrencies” bandwagon. Kenneth Rogoff put it succinctly,

“The long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates. I have no idea where bitcoin’s price will go over the next couple years, but there is no reason to expect virtual currency to avoid a similar fate.”

What do the Charts say?

I’m not a fully trained nor accredited Chartist like some our esteemed readers are, so kindly pardon me and do correct me if my subsequent analysis runs short.

While in September, the Bitcoin chart shows a classic reversal “Head and Shoulders” pattern, it broke the bearish trend line, and it punched through the resistance with a thick and impulsive uptick on 25 Sep. It opened at 3,667 and soared through the resistance levels of 3,800 and closed at 3,968.

What followed in the next few days were sustained bullish momentum that took it above the psychological barrier of 4,000 on 27 Sep, where it opened at 3,883, spiking wildly higher and closing at near day highs of 4,226. The subsequent trading days were the typical, short and steady upticks bars, grinding the path higher to where it is trading now, around 4,600 levels.

As a former Prop Trader, the current chart patterns tells me to respect the current bullish trend. It will take a lot of pain and guts to short this market. (Anyway, you cannot really short it, like you can in an established exchange like TSE or CBOT that boast liquid markets with amazing depths). Unless, you have deep pockets coupled with guts and stomach made of steel, it is best not to go anti trend now.

So what is my view? Have I changed?

Nope. I still think that cryptocurrencies are overhyped and overbought. The stories of being a safe haven, unregulated currency and alternative storage of wealth are oversold. (sorry pun not intended)

I echo the views of the more well known and established naysayers in the market. Nobody can beat the market, especially one that afterall controls and regulates, and has the right as the sovereign powers after being elected by the respective people of their countries. Unless the majority of the world turn to cryptocurrencies, otherwise I do not see it replacing the legal tenders of the world.

Just watch out, do not be caught swimming naked when the tide goes out!

about author

Seng Ti is currently heading a Treasury & Finance team in a MNC and is serving as the President of the Association of Corporate Treasury (Singapore) aka ACTS. He enjoys reading and discussing about current affairs, politics, life, wine and lives a normal life with his wife and 2 young kids.

  • dick23

    I don’t think bitcoin is going to replace legal tender anytime soon, but neither is it going away anytime soon in my opinion. anyway people are putting their money into bitcoin in the recent weeks because of the upcoming bitcoin fork on 25 October. You will be given an equivalent amount of bitcoin gold for every bitcoin that you have. This is exactly the same as the last hard fork a few months ago (bitcoin cash)

    Currently, bitcoin is going up while most other alt coins are on downtrend. Do expect a correction after the fork, as people start putting their money from bitcoin into other alt coins.