Analysis Archives

Bitcoin Price Analysis: End of the Sideway Movement and Bitcoin All Set for the Next Big Launch

Posted on April 7, 2017 | by [email protected]

Anyone who has followed the Bitcoin price closely in recently would see a pattern Bitcoin prices have been following. From the second half of 2016, the month over month price of Bitcoin has been increasing steadily, irrespective of the type of negative fundamentals the currency had to deal with. Momentary price dips have been countered effectively to keep the Bull Run going up until the start of the New Year. However, the scenario changed from the start of 2017 with Bitcoin prices remaining predominantly sideways in between the $1000-$1250 range. Irrespective of the fundamental reasons, Bitcoin has consolidated enough in terms of volumes to prepare for a good run. Let’s look into how fundamentally and technically Bitcoin stands in terms of an impending run.

Fundamental Analysis

Bitcoin has been contained between $1000-$1250 by various fundamental factors which include the consecutive ETF rejection and the scalability debate. Now that the Bitcoin community seems to have come to some kind of compromise over the block size, the prices have stabilized. More importantly, the block size increase would now accelerate the transactions and increase the Bitcoin’s utility by a great margin. Things look more favorable now for a Bitcoin bull run owing to the dynamics in Japan and Mexico. Japan has legalized Bitcoin as a digital asset and a valid way of transfer starting from April 1^st. With 260,000 Japanese vendors all set to accept the digital currency, things are looking very bullish for Bitcoin.

In the western part of the world, Mexico has introduced a bill to legalize Bitcoin which would in turn fire up the remittance market and increase cross-border Bitcoin transactions. With strong adoptive fundamental factors driving the prices, Bitcoin looks charged up for the run.

Technical Analysis:

Technically, Bitcoin has been in a trend and has fallen into a temporary sideways pattern. While the market players are testing the $1200 psychological barrier (at the time of writing this article), the Bollinger bands suggest that a breakout can be expected, and, given the trend it can very well be in an upward direction. While the market still has the potential to drop till $1,100 before making a final launch, it would be wise not to short in such a market. Even the RSI Indicator is in the mid region showing that there is still buying potential in the market and it’s not advisable to short recklessly in the market.

You heard it here first.

Invest in Bitcoin : Look out for the right signs

Posted on July 31, 2016 | by [email protected]

Invest in Bitcoin?

It is clearly he front runner among all the various cryptocurrencies and has steadily consolidated its presence. As more people invest it bitcoin, it is reflected in the increased trading volumes across the exchanges around the world. With more investors taking it seriously and using it as portfolio diversification tool, Bitcoin has proven to be a reliable channel for temporary hedging. Owing to these characteristics, it is being considered as digital gold since its supply is also limited. As we have an estimate of when its production comes to a halt, long term investments in Bitcoin are feasible. Based on historical data and trade driven analysis, here are a few scenarios where mid to long term investments in Bitcoin might be a good idea:

Governments working towards adopting Bitcoin:

Any news which promotes the adoption of Bitcoin, especially by the Government strengthens the positive sentiment towards it, more people decide to invest in bitcoin. When Silk Road was closed and bitcoins were seized, the currency came under a negative light. But when the US Senate held a hearing in the later part of 2013, under the title “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies” and many senators came to consensus that Bitcoin holds great promise, the trading price of Bitcoin boosted remarkably ( $685-$1072 in 10 days).

Later in 2015 New York State Department of Financial Services released a set of customized rules. These were meant to regulate Bitcoin and digital currency businesses. They were the first ever set of rules directly targeted at digital currency businesses. There was a significant rallying in price which shows how positive, their adoption is for the market sentiment.

Major firms adopting Bitcoin as a payment method:

When mainstream companies adopt Bitcoin as a payment method, more people invest in bitcoin and it has a positive impact on prices. These opportunities would be ideal for mid-term trades. This is owing to the fact that something as nascent as Bitcoin has found roots in the existing system which strengthens its credibility and onsets positive sentiment. This was clearly observed when companies like Microsoft, Dell, Paypal and Overstock.com embedded Bitcoin in their payment systems.

Launch of new Bitcoin exchanges:

Whenever a reputed firm in the Bitcoin world undergoes change, it will have implications on trading prices. The launch of new Bitcoin exchanges or structural expansion of wallet companies or blockchain technology companies into newer areas is always a positive sentiment marker which encourages more people to invest in bitcoin. (Coinbase and Gemini exchanges are good examples). Depending on the sheer volume of the change or launch, mid or long term investments can be planned.

Global acceptance or macroeconomic factors:

In early 2013 when People’s Bank of China accepted Bitcoin, new trading volume started flowing in. The price of a bitcoin shot up by $ 400 in a span of 10 days and the market went berserk. A similar sentiment was observed when EU declared that there would be no VAT (Value Added Tax) on Bitcoin Trades.

Though China took a negative stance on Bitcoin, increased volumes in Bitcoin trading while Yuan was devaluated were observed. Major global events where people look at Bitcoin as a hedging option, always drive up its trading prices. This makes these events ideal scenarios for investing.

Basing on these factors and clever entry positions, one can plan profitable investments in Bitcoin that are assured to give good returns.

Bitcoin Versus Gold

Posted on July 29, 2016 | by [email protected]

Bitcoin as an investment?

It’s natural for economists to give gold a better score when comparing Bitcoin versus Gold for investment purposes. Gold has been studied, traded and invested in for over a thousands of years. It has been an integral part of human civilization for a long time and has an undeniable track record that can be traced to the earliest civilizations on earth.

So it makes sense that a majority of economists (Paul Krugman included) have more faith in the precious metal than the relatively new digital currency.

However, for the believers, one reason that pushes them towards the credibility of bitcoin versus gold as an investment is that it is only about five years old. and, it is already competing with gold.

But, the golden question here is.

Are there similarities between gold and bitcoin?

After all, bitcoin has taken the world by storm and there is speculation that it will soon surpass gold in terms of popularity. Here are a few attributes that are inherent in both bitcoin and gold

Looking at the Bitcoin versus Gold Price Movement

Limited Availability of the two assets

Gold’s cultural value and importance comes from its scarcity. Gold is available in limited quantities to meet its demand. It is estimated that in the entire history of man kind only 171,300 tonnes of gold have been extracted.

The story is similar for bitcoins. There will only ever be a limited quantity of 21 million bitcoins in circulation, which is probably going to be reached far off into the future, the majority opinion is 2141.

Those are just a few of the reasons why people think both gold and bitcoins are precious when analyzing Bitcoin versus Gold.

No Backing

Bitcoin and gold are backed by no one. While there are real market values for both, they are neither controlled nor governed by any central agency. This makes the prices of both adjust according to demands in a transparent manner.

Both have value due to the reason that society has faith that they will keep said value over time. Some say gold has industrial use, but the majority of gold is purchased for investment. Don’t forget, both gold and bitcoin are open source.

No Intrinsic Value

Both gold and bitcoin have no intrinsic value in my opinion. They are of no use if, say, an apocalypse arrives. They have demand but are not something which can be used to meet our basic needs like food and water.

Sure, you can use gold to get money but it is again due to the fact that society has faith in it. In many places the situation for bitcoin is the same.

When it comes to Bitcoin versus Gold

Bitcoin is built with the ubiquitous internet revolution in mind. It has some ideal attributes of the online world: decentralization, transparency, cryptography and is peer to peer. Gold has none of this and it is really heavy to move.

As a contemporary payment system, bitcoin could be used globally with security and speed.

John Browne from Euro Pacific Capital opines:

“the advent of crypto-currencies represents the increasing popular demand for a currency insulated from political debasement and bank profiteering. Crypto-currencies represent a legitimate attempt by private citizens to reassert their sovereignty over such government actions.”

No matter what the economists say about bitcoin, these attributes give bitcoin a healthy advantage.

Analysis: Should You Get a Bitcoin IRA?

Posted on July 19, 2016 | by [email protected]

Analysis: Should You Get a Bitcoin IRA?

Imagine turning your retirement nest egg to Bitcoin. By adding a Bitcoin IRA to their investment portfolio, that’s what many people are doing, literally. The rise of Bitcoin to its current price of $668, sitting at close to 2016 highs, had many people taking a serious look at the popular digital currency. But is this the right move for you?

A Bitcoin IRA is a type of IRA that allows the investor to own Bitcoin, instead of paper-based assets such as cash, stocks and bonds. It is similar to the Gold IRA that was created by Congress in 1997, says Edmund C. Moy, chief strategist for Bitcoin IRA and former United States Mint director, who oversaw the largest production of gold and silver coins in the world.

To qualify as Bitcoin that can be held in an IRA, certain criteria are required. “The Bitcoin must be held by the IRA trustee instead of the IRA owner. The Bitcoin must be stored in an IRS-approved depository,” says Moy. Mainstream investors don’t want to actually store Bitcoin themselves, as security is quite complex.

“All other rules about IRA contributions, disbursements and taxes apply,” Moy adds.

Why Bitcoin?

Bitcoin IRAs appeal to investors who want a diversified retirement portfolio.

Traditional and Roth IRAs invested in stocks or mutual funds are vulnerable to inflation. “Because Bitcoin prices generally move in the opposite direction of paper assets, adding a Bitcoin IRA to a retirement portfolio provides an insurance policy against inflation,” says Moy. “This balanced approach smooths out risk, especially over the long term, which makes it a smart choice for retirement investments like IRAs.”

A Growing Trend

Moy says there is going to be a bit of a learning curve towards Bitcoin IRAs because they involve a very complicated transaction that only the most persistent investor was willing to pursue. “You must find a trustee or custodian for the IRA along with an approved depository. Then, you need to buy the approved Bitcoin and have it transferred to the depository in a way the custodian can account for it,” he explains.

Because of the financial crisis of 2008 and the resulting Great Recession, Bitcoin IRAs are starting to become significantly more popular. BitGo, a leading Bitcoin wallet provider and experts in security have partnered with Bitcoin IRA to simplify the transaction have made investing in a Bitcoin IRA a one-stop shop for a Bitcoin IRA. Result: robust Bitcoin IRA growth.

Then, of course, there’s the impact of economic and world news. “Strong interest in Bitcoin IRAs has continued because of the potential inflationary impact of the Federal Reserve’s stimulus programs and a sharp increase in geopolitical risk,” says Moy.

Finding a Reliable Broker/Custodian

To put IRA funds into Bitcoin, you have to establish a self-directed IRA, a kind of IRA that the investor manages and can be invested in a wider range of products than other types. For a Bitcoin IRA you need a broker (to buy the Bitcoin) and a custodian to create and administer the account. This company will store or hold your actual Bitcoin, says Chris Kline, Chief Operating Officer of Bitcoin IRA, headquartered in Sherman Oaks, California.

Custodians are usually banks, trust companies, credit unions, brokerage firms or savings and loan associations that have been approved by Federal and/or state agencies to provide asset-custody services to individual investors and financial advisors.

Bitcoin’s Special Risks

All investments come with risks and rewards, Bitcoin IRAs included. “In many ways, Bitcoin IRAs have the same risks that any investment has,” says Moy. “The price of Bitcoin can go up or down and have volatility. No one can accurately predict its future.”

But despite the risk, Moy says there is a reason to invest some of your retirement funds in Bitcoin. “Bitcoin may have a short historical track record of being a store of value, but its innovative algorithm and decentralized nature makes it a great asset to hold in any portfolio. Stocks can go to zero as we’ve seen with Lehman Brothers, bonds can default like in Argentina or get big haircuts like in Greece. The value of the dollar has steadily gone down” says Moy.

But there are also some risks specific to investing in physical Bitcoin.

Bitcoin is subject to security risks associated with the private and public keys that control and store it. Those with little experience in Bitcoin should either use a company that stores Bitcoin using the latest multi-sig security or spend the time to learn about security. However, to qualify for Bitcoin IRAs, depositories are required to be insured, which would protect your investment as long as your account doesn’t exceed the custodian’s stated value.

The Bottom Line

Bitcoin IRAs are normally defined as “alternative investments,” which means they are not traded on a public exchange and require special expertise to value. While Bitcoin has the potential of a high return, it’s easy to be blinded by its recent growth in price. Bitcoin can be volatile.

If you’re considering a Bitcoin IRA, consult a Bitcoin IRA advisor to determine how Bitcoin would fit with the overall goals of your portfolio. And request a free Bitcoin IRA Rollover Guide for more information.