Bitcoin’s weak rally suggests more losses ahead
Over the course of this year Bitcoin (BTCUSD) has followed a repeating pattern of sharp losses, followed by half-hearted rallies that fail to reach the high of the previous upswing before losing ground again and undoing in a single day all the hard work (usually over many days) that it took to recover from the previous fall. This pattern seems doomed to continue as the current general uptick has taken 3 weeks to gain $300, a far cry from the hysterical buying of late 2017 that saw it rally to a whopping $19,500, with many pundits predicting insanely high valuations for the cryptocurrency benchmark by the end of this year. We’d allow a greater margin for error in this volatile and illiquid product and would need to see a close above $7,500 before we reviewed our bearish position. There is a point at which Bitcoin will have investor value but the only people buying here are the ones that are looking at where it was valued in December 2017 and making the judgment that it looks cheap today by comparison. This is a trap that many investors and traders have fallen into over the years. The correct question investors should be asking themselves is not how comparatively cheap it looks compared to 9 months ago, but how it will look in 9 months time.