This just in from Hussein Sayed, Chief Market Strategist at FXTM. It's a news release put out to anybody likely to be spending their holiday writing about Bitcoin - the idea being, of course (do I need to explain this?), that they can quote from it freely. It's an interesting take on where we are now, and for me, worth saving. No, I don't usually pick up media releases in this space, but hey, let's not make a rule out of that. So here goes.
Hussein Sayed writes (in black):
With most financial markets in vacation mode, Bitcoin is the only currency making big moves in a holiday-thinned trading week.
After crashing by more than $8,000 from an all-time high, Bitcoin is up 3.5% at the time of writing [release received here early on the 27th]. Although the recent plunge frightened many Bitcoin fans, when looking at the relatively short history of Bitcoin trading, the price action seems just normal. During 2017 the cryptocurrency crashed by 30% or more six times. Every fall was followed by huge price appreciation until it peaked on 17 December.
I say (in grey):
A pleasingly sane comment, after the switch from "We profile the new Bitcoin millionaires" to "Bitcoin was always a disaster waiting to happen" in the main media. Hussein Sayed continues:
Whether the Bitcoin bull market is close to an end or just pausing for a short break, remains to be a wild question for 2018. I still believe that Bitcoin is in a bubble formation. However, there’s no effective test to measure at which stage we are currently standing. For example, equity prices may be said in a bubble territory if investors are willing to pay much more for a stock than the intrinsic value which is justified by the discounted divided stream. Similarly, econometric tests may be run on bonds, commodities, currencies or any other asset to come up with a justified value. For Bitcoin, there isn’t any fundamental basis to justify the price.
Buying Bitcoin falls somewhere between investing in a stamp collection and buying gold, with the two complications that, one, it's digital, etc., and therefore compatible with the global economy, and two, it has a history of misuse almost as bad as that of, say, the US dollar. Oh, and the technology doesn't seem to be quite there yet for keeping your investment safe. Moving on:
Traders should look at multiple factors to anticipate the next move, such as government regulations, hedge funds' interest, the stability of the network, and broader mainstream adoption.
And the long-term argument in favour may be very different from the short-term case. For all we know, Bitcoin may turn out to be the Betamax of some future cryptocurrency war, with Ethereum or maybe some kind of Fedcoin as the VHS. Sayed concludes:
However, latest signs are not encouraging. Here are a few: Israel became the most recent country to propose banning companies based on digital currencies to trade on its stock exchange; a South Korean bitcoin exchange has been hacked, leading it into bankruptcy; cryptocurrency exchanges are disabling transactions temporarily due to high traffic; professional traders on CBOE seems to be going short on Bitcoin.
I remember the phrase "take profits". Not that I'm spending the holiday writing about Bitcoin, but it's a strange and interesting subject at the moment. We are the beneficiaries (sic) of a globally interconnected economy; it's digital, it harnesses the power of technology, puff, blah; and as a result, we're all happily shopping and investing online, telling our digital assistants to pick up the remote and channel-surf for us, living wonderfully tech-enabled lives as we watch fit people being active on our screens.
And yet we balk at a currency that fits in so neatly with everything else.
Whatever next?
Hussein Sayed writes (in black):
With most financial markets in vacation mode, Bitcoin is the only currency making big moves in a holiday-thinned trading week.
After crashing by more than $8,000 from an all-time high, Bitcoin is up 3.5% at the time of writing [release received here early on the 27th]. Although the recent plunge frightened many Bitcoin fans, when looking at the relatively short history of Bitcoin trading, the price action seems just normal. During 2017 the cryptocurrency crashed by 30% or more six times. Every fall was followed by huge price appreciation until it peaked on 17 December.
I say (in grey):
A pleasingly sane comment, after the switch from "We profile the new Bitcoin millionaires" to "Bitcoin was always a disaster waiting to happen" in the main media. Hussein Sayed continues:
Whether the Bitcoin bull market is close to an end or just pausing for a short break, remains to be a wild question for 2018. I still believe that Bitcoin is in a bubble formation. However, there’s no effective test to measure at which stage we are currently standing. For example, equity prices may be said in a bubble territory if investors are willing to pay much more for a stock than the intrinsic value which is justified by the discounted divided stream. Similarly, econometric tests may be run on bonds, commodities, currencies or any other asset to come up with a justified value. For Bitcoin, there isn’t any fundamental basis to justify the price.
Buying Bitcoin falls somewhere between investing in a stamp collection and buying gold, with the two complications that, one, it's digital, etc., and therefore compatible with the global economy, and two, it has a history of misuse almost as bad as that of, say, the US dollar. Oh, and the technology doesn't seem to be quite there yet for keeping your investment safe. Moving on:
Traders should look at multiple factors to anticipate the next move, such as government regulations, hedge funds' interest, the stability of the network, and broader mainstream adoption.
And the long-term argument in favour may be very different from the short-term case. For all we know, Bitcoin may turn out to be the Betamax of some future cryptocurrency war, with Ethereum or maybe some kind of Fedcoin as the VHS. Sayed concludes:
However, latest signs are not encouraging. Here are a few: Israel became the most recent country to propose banning companies based on digital currencies to trade on its stock exchange; a South Korean bitcoin exchange has been hacked, leading it into bankruptcy; cryptocurrency exchanges are disabling transactions temporarily due to high traffic; professional traders on CBOE seems to be going short on Bitcoin.
I remember the phrase "take profits". Not that I'm spending the holiday writing about Bitcoin, but it's a strange and interesting subject at the moment. We are the beneficiaries (sic) of a globally interconnected economy; it's digital, it harnesses the power of technology, puff, blah; and as a result, we're all happily shopping and investing online, telling our digital assistants to pick up the remote and channel-surf for us, living wonderfully tech-enabled lives as we watch fit people being active on our screens.
And yet we balk at a currency that fits in so neatly with everything else.
Whatever next?