Bitcoin

When you read my today's notes you may not like what you read but this is only "my" current viewpoint. One man's opinion. All comments are welcome although I may not respond to each individual one.

We live in interesting times. Bitcoin has become some sort of a religion. Not only do people buy as much as they can it also has become a way to rebel against government and fiat money and market participants take this very serious and personally. It also seems like everybody thinks he can get rich almost instantly and I have seen people already quitting their jobs to become full time traders in crypto currencies. Well, I have experienced exactly the same mania about 20 years ago just before I moved to the USA. Needless to say, everybody knows how it ended. It was one of the greatest stock bubbles of our times. The Nasdaq hit 5,000 only to correct about 75% and left a lot of people with nothing. Nobody wants to hear this but the way this is going it doesn’t look like it is going to end any different. Now, don’t get me wrong. I am a big believer in crypto currencies too but I am not in love with BTC nor do I take this personally because I am an investor and trader in the first place looking for a good return. To me crypto currencies are just another asset class with HUGE profit potential. Everybody should participate, in fact if you don’t you are the one loosing out so far. However, this is pure speculation. There are no fundamentals, only promises, no metrics to assess value, nothing measurable therefore the price of any of these currencies is only determined by supply and demand (money flow).
People are investing all their savings, scaling in at peak levels and risking everything to get a piece of the action. This is just crazy. In previous postings I recommended to invest only 5 to 10% of your liquid net worth and you should assume that there is a possibility you could loose all this money in an instant. Nobody seems to care that one day the government can step in and just says stop. BTC government banned! Don’t think it can’t happen. The US government confiscated gold from individuals in 1933. You were able to hold on to a bit but thereafter the government devaluated the asset.
I am not trying to scare anybody but you should be aware of the risks. We are currently experiencing a correction in the price of BTC. Nobody knows how high BTC will eventually go but the attached charts give you some prospective price levels of how deep this correction will go based upon 8/12/2017 peak. These levels are called Fibonacci retracements and are being used by professional traders to forecast a price level of where BTC will find support and the selling dries up. Once support is established this will be a turning point for the trend to continue unless this was a trend reversal.

Chart 1 (BTC/USD)
From the low on 15/9 until the top on 8/12 you could expect the price to retrace anywhere between $8,410 and $11,747
Chart 2 (BTC/USD)
From the low on 12/11 until the top on 8/12 you could expect the price to retrace anywhere between $9,910 and $12,969
Please note that these values are not exact depending on what exchange you got your prices from and the correctness of the lines drawn. These just act as guidelines for a healthy pull back. Sometimes, pullbacks are more shallow but the steeper the runup the bigger the pullback as a general rule. It
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