UBS White Paper Calls Bitcoin a Speculative Bubble

UBS White Paper Calls Bitcoin a Speculative Bubble
November 22, 2017

 
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 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 crypto currency 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 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 in the block chain technology. However, he considers crypto currency 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 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 to 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 crypto currency. While calling Bitcoin as 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 recognised the potential of block chain 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 the Bitcoin in the near future.

Technically, a downtrend is signalled 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.

BTCUSD - Technical Analysis - 22nd November 2017

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: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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