Sunday, April 22, 2018

Bitcoin Buyers Are Hungry

This is the most significant Bitcoin news I've seen for some time now:

"For the first time since March 2017, buy orders now compose over 92% of market activity. Hot on the heels of a massive $120 billion recovery, the massive surge in buy orders heralds an impending bull market that could potentially exceed the monstrous late 2017 run up.

Data from TurtleBC demonstrates that cryptocurrency buy market percentage across a diverse range of coins including Bitcoin, Ethereum, Ripple, Dash, NEM, and money is currently at a massive 92.86%, greater than the December 2017 high of 88%." -- S. Town

Wednesday, April 18, 2018

Bitcoin Whale's $100 Million Cannonball Creates Only Small Splash

It's in the Bitcoin news this morning that a couple of "Bitcoin Whales" sold off $100 million of BTC yesterday, causing a "crash" of $200/BTC.

Two things:
  1. If a "crash" is now defined as a $200 move, I'd say we're in good territory again, and
  2. If these two were selling, that means people were eagerly buying, which kept the price from falling much further and hints that life is returning to this market post tax day.
BTC is at $8091.13 on Gemini as I type this.

"The balance of wallet 3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r — an anonymous digital account which is valued at $1.49 billion — fell by 6,500 bitcoin Tuesday, with the average sale price sale being $8,146.70, a total value of just over $50 million, according to bitinfocharts.

The sale comes a day after the third-largest wallet, which famously purchased over $400 million in bitcoin in February, let go of 6,600 bitcoin at an average price of $8,026. All told, the two whales dumped over $100 million of bitcoin within 24 hours." -- A. Hankin

Tuesday, April 17, 2018

got HODL?

Today is tax day in the U.S., the date upon which Federal income tax returns and payments (if you're in that miserable camp) must be postmarked. I sent mine in last week, electing to skip my usual ritual of making Uncle Scam wait until the very last second to get my money. I guess I've given up on doing that since the Feds won't even hardly notice what I sent in, despite the amount being more than the annual household budget I keep myself on, from my perspective.

I digress. Part of many people's tax returns this time around included gains and losses from trading cryptos. In fact, as I've written about recently, unexpected tax bills on crypto gains taken in 2017 may have prompted round after round of punishing selling as people sold off Bitcoin and other cryptos to raise funds to pay them. Add to that that others may have realized the mistake people were making in assuming that profits from Bitcoin et al. were not taxable, anticipated that they would sell to raise cash, and began selling themselves, either to protect their own profits or to drive down prices so they could buy back in lower later on. Think of it as a reverse short squeeze.

On my tax return, there was zero mention of crypto anything. I avoided all of the headaches, an even larger tax bill, any stress over the possibility that Bitcoin would take off again without me, etc.

Why? Because I HODL.

"...empirically, even in volatile assets like bitcoin, carefully choosing an asset and holding long-term positions has proven to offer the best return.

Warren Buffett, the most successful investor of modern times, has often said that he only invests in what he knows. His preferred holding period: forever. With that model, his company, Berkshire Hathaway, has averaged a 19 percent annual return since 1965 which means it has risen more than 1 million percent.

Theoretical models that assume participants know when markets will move against them can offer better returns but, in practice, market movements cannot be reliably predicted so even when people like Bernie Madoff try to make us think that they've figured it out, they haven't.

Long-term investment in quality assets remains the only reliable investment strategy.

Simply put, HODLing works." -- S. Hopkins
 The rest of the article is an interesting read, but I focused on this part because it echoes something I say often: all of this, everything that's gone on in cryptos up to this point, these are still only the early days. There's really not much to do except find the high quality offerings among all that are out there now, acquire some, and wait. The really big gains are ahead, so why hop in and out of the stuff in the near term for small gains, while also risking badly mistiming the market?

I also really hate paying taxes, so...

Thursday, April 12, 2018

Bitcoin Spiking As Tax Season Ends?

Tax season in the United States ends next week with the Federal income tax filing deadline fast approaching on April 17th. I just finalized my Federal and state taxes this morning. All I have to say about that is, "next year will be better" (thanks to the Trump Administration's tax cut passed late last year that are in effect now).

Between my pest control work picking up massively as we head into spring and having my head in the paperwork nightmare that is our tax system these days, I haven't kept up with this project. But in terms of cryptos and other investments, I also haven't seen much that is new and noteworthy either.

Except for one thing that I came across about a week ago that I thought was interesting: TechCashHouse discussing  Bitcoin regaining upward momentum after tax season passes, a prediction made by Fundstrat's Tom Lee.

Why? Basically that people are selling to raise money to pay tax bills. Once that need passes, so will the major selling.

When I first heard the idea, I shrugged and said, "well, it's as good a prediction as any other." That is, it will be believable when (if) it comes to pass.

Then today, this happened.

Given the position the Bitcoin market has been in as of late, maybe there's something to this after all...

Monday, April 02, 2018

Has The Crypto Market Reached Maximum Pessimism?

It's been a few days since I've posted anything, mainly because I have family visiting, which involves them taking new employment near where I live and then relocating to here. A lot of work to be done in a very short span of time, basically.

That pause in my blogging has given enough time for something to occur that I've been wondering about and looking for, maybe: I have been watching for signs of  "maximum pessimism" in the crypto space.

Maximum pessimism is the state of affairs where after a long period of punishing declines in the price of some thing or a whole market, many of the so-called "weak hand" traders and investors finally capitulate and sell off their positions. Some time after they have done so and gotten out of the market, a reversal occurs. How long it takes for that reversal to appear is anyone's guess, but considering how fast-paced crypto markets are, I would expect it to occur soon, because I think the moment of maximum pessimism has passed.

Consider this snapshot of the daily Bitcoin chart. The latest big event that was supposed to bring further pain to Bitcoin HODLers was the appearance of the "Death Cross," a technical analysis formation many traders watch for that is supposed to indicate the emergence of a long-term bear market. It is the crossover of a 50 day moving average line with a 200 day moving average line, heading down. Moving averages are plotted on the chart by taking the average of the price (opening or closing, depending on how you set up the indicator on your chart) over the number of sessions specified; 50 and 200 days, in this case. This gives you a picture of the near and long term price trends and is used as a backwards looking tool to forecast future trends. On the chart, the Death Cross is visible, having occurred this past Friday, displayed here as the cyan line crossing over the red.

If you count the candlesticks from right to left, you can see that there was major selling five days ago, which in my time zone was occurring on Thursday, March 29th, just ahead of the appearance of the Death Cross. And then... nothing.

So now, here we are, Bitcoin have bounced off of a previous low, which you can see by looking left on the chart, back to candles that represent activity that occurred during the first week of February, when prices hit these same levels and then began the short term rebound that took Bitcoin to a recent high around $11,500. Then as now, other indicators are pointing to a rebound: a price close to a 50% discount from the most recent high ($11,775, achieved on February 20th), price action below the 200 day moving average (again, the red line), and a Relative Strength Indicator reading below 40, placing the current prices deep into "oversold territory" (the RSI is the purple-ish box with the green line at the bottom of the chart).

And last but not least, the much feared Death Cross, which in this case appears to have merely confirmed what was already known, that we have been in a down trend for some time. Given that moving average indicators are "lagging indicators," meaning they can only display data derived from what has happened, they do not indicate what will happen in the future, just what might happen. In cases like this one, the Death Cross can take so long to appear that it is in effect playing catch-up to what the market already knows, and its formation only serves to scare away the last of the weak hands, evidenced by what has now happened: a lack of further drastic selling and successful "defense" of a price at a prior major support level.

The other thing I look for as an indication that the moment of maximum pessimism has passed is the character of the headlines reporting on the thing or market I am tracking. For the last several weeks, a search for "Bitcoin" on the news tab of the Google search engine was turning up piece after piece of doom and gloom.

This morning, the first page results looked dramatically different:
 So here we are, perhaps at the end of the bloodbath of the last few months. If going forward from here sentiment seems to continue to improve, and if the current low holds, then this might finally be "it." Time will tell, but as for me, I've already repositioned a few things in case this is the turnaround, and I may add some new funds in addition. As Sir John Templeton said, "The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell." I think this could be the former, so off I go, preparing to take advantage of the latter at some point down the road ahead.

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