Bitcoin has gone parabolic yet again, reaching as high as $16,000 on the Bitstamp exchange, and as high as 17,000 on other exchanges. When I look at this chart, I noticed several issues.
Bitcoin continues to rally during the trading session on Thursday, reaching as high as 17,700 on some exchanges, but when I look at the Bitstamp exchange, we only went as high as 16,000. Because of this, the market looks very likely to roll over significantly, and at the end of the day we may very well end up finding ourselves forming a shooting star. A shooting star will be a very negative sign, and quite frankly anybody buying at these high levels are going to be hurting given enough time. I think that a breakdown from here should then reach to the 12,000 handle, perhaps even the 10,000 level. If you are buying at these high levels, you are trying your best to lose money. Quite frankly, I believe the trading Bitcoin at these high levels to alongside is essentially “chasing the trade.”
The parabolic nature of this chart is unsustainable, and I believe that the massive move during the middle of the trading session on Thursday is a sign of a potential “blow off top.” As we pull back, I think there is a lot of profit-taking by professional traders, as they realize this momentum cannot keep up. In general, I think that the “floor” is somewhere near the $10,000 handle, and quite frankly it would not be surprising at all to see this market race back towards it. There are a lot of concerns when it comes to the bubble, and I cannot help but wonder whether it is simply the “dumb money” chasing the market now. When you have 300,000 new accounts at Coinbase over the course of the previous weekend, that is the very definition of “dumb money” coming into the market. Institutional investors have already been involved, and of course those who are longer-term believers have been in the market for a long time as well.
BTC/USD daily chart, December 08, 2017
The biggest problem that I see in this market is that it is foolish to think that the momentum can continue going higher. Unfortunately, by the time he gets out to the general public, the easy money has already been made. I’ve been speaking to several pundits that are dumping off Bitcoin at these elevated moves, as they are collecting profits. Quite often, this happens in almost every market explosion, the longer-term traders are selling at higher prices for those who are willing to chase the trade. They then wait for the market to collapse, and then start buying again. I cannot in good conscience start buying in this area, and even though we could very well see a continuation of the move in the short term, moves like this only in one way: in tears. Caution is the best advice that I can give.
