Bitcoin is getting hammered today. There is no real catalyst, but the Libra hearing at the Congress was all but positive for any cryptos.
If cryptos is the new money or not, if the tech is great or not, we leave to pundits to decide. For us cryptos is a speculative asset and will remain so for a long time. As of writing, Bitcoin trades at day lows, -12% on the day. This is not normal for a “serious” asset.
There is nothing wrong with speculation by the way.
Below is a longer dated chart of Bitcoin for some perspective. It has all the classical euphoria/panic features that you can spot in pretty much any asset that “goes crazy”, from tulip bubbles to NASDAQ bubbles.
The move higher so far this year has the classical parabolic chart. Trends getting steeper and steeper, until they break. Bitcoin was rising “steadily” over past months, but recent price action has been very volatile, with moves of 10%, both up and down.
Increased volatility on highs is often associated with market tops. The classical pattern is increased volatility and then a sudden break, just what we are seeing develop over past sessions.
It is very hard to predict where Bitcoin is heading for in the short term, but a break below the psychologically big 10k level is not great.
No real information was given during the Libra hearing, but the sentiment among the “non-believers” is not overly optimistic. The past few months has managed attracted new “fundamental longs”, that are suffering now, and will probably end up buying more in order to “average down” the price, the classical fallacy in trading.
Our advice for Bitcoin here is to focus on your risk management, and not engage in the often so lethal game of not addressing the risk in your portfolio in a dynamic and objective way.
For more reading on risk management and portfolio optimization, please check the section here.