In our November 15 report, we had predicted a sharp bounce back in the price of Bitcoin, which had plunged below $6000 due to the suspension of the Segwit2x hardware fork. We had expressed our willingness to purchase the coin at around $6,500, with an aim to exit at around $7,500. As anticipated the cryptocurrency broke above minor resistance levels to hit a high of $7,970 on November 17. The pair is now trading above $8,100. We anticipate a correction to begin in the BTCUSD pair due to the reasons given below.
While commenting on the recent appreciation in the price of Bitcoin, Dennis Gartman, also referred to as the “commodities king”, stated that there is no inherent value in the digital currency. Gartman did acknowledge the merit of blockchain technology. However, he considers cryptocurrency exchanges as a platform for criminals.
Gartman further compared Bitcoin’s appreciation in price to Tulipmania in 17th century Holland. His skeptical stance is also shared by a few more well-known investors such as Jamie Dimon. Even though the arrival of derivative products from reputed exchanges such as CME will nullify such arguments, still, for the time being, such kind of rude comments from well-known investors could turn the sentiment bearish in the short-term.
Mark Haefele, chief investment officer at UBS Group AG, is of the opinion that Bitcoin presents an unquantifiable risk. His argument stems from the assumption that a single terrorist incident backed by Bitcoin would certainly make the US regulators take actions that could potentially cause a panic selling. According to Haefele, such a risk is not quantifiable. The world’s largest wealth manager also contradicted Goldman Sachs’ claims of increasing interest from investors towards the cryptocurrency.
While calling Bitcoin a speculative bubble in its white paper, UBS AG stated that there is no real desire by high net worth individuals to invest large sums in Bitcoin. Ironically, UBS AG has recognized the potential of blockchain technology and is running its own digital currency project. Thus, negative comments from major institutions and well-known investors are expected to turn the sentiment bearish towards Bitcoin in the near future.
Technically, a downtrend is signaled by the MACD indicator, which is making a negative divergence with the price. Further, the price chart indicates resistance at 8200 levels. Thus, we can expect the pair to decline in the short-term.
A short position may be opened by us to gain from the impending decline. We would wait to enter the trade near 8120. To minimize risk, a stop-loss order will be placed above 8300. We are planning to book the profit near 7230.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
