Bitcoin in bearish place
We’re hearing a lot about Bitcoin these days. The stories range from fortunes made on the currency to the idea that this is the biggest bubble in history. What we’re not seeing much of our analyses of the bitcoin market, and even less so of bitcoin users.
Now, in an article on the Fortune website, they reported that nearly 60% of Americans have heard or read about the world’s largest cryptocurrency, according to a joint SurveyMonkey and Global Blockchain Business Council poll of more than 5,700 adults conducted in January. But only 5% of people actually own the digital coin.
Those few Bitcoin investors are of a fairly consistent demographic. An overwhelming 71% of them are male. The majority — 58% — are young, between the ages of 18 and 34 years old. And unlike the broader U.S. population, nearly half of them are minorities.
When asked why they bought the crypto asset, investors answered that a combination of a lack of trust and an opportunity for return are at play. About one-third of Bitcoin owners said it was a means to avoid government regulation — 24% also said they trust bitcoin more than the U.S. government in a separate question — and about two in 10 saw it as a hedge against crashes in traditional assets. More than 60 percent also said that buying the digital coin was seen as a growth investment.
This shows at least one thing. It is generally easy to think that people are buying bitcoin because they believe that the currency will become much more important in the future. We have seen a lot of statements along the like of “Investors believe in Bitcoin” or “Bitcoin will turn payments upside down.” What they mean is actually not clear. We, however, are inclined to go deeper as far as the forces driving the market are concerned since we want to give you a clearer idea of what’s going on in the market.
If we indeed go deeper, then the facts that people buy Bitcoin mostly for capital gains and that the buyers are young suggest that if we see a sizable correction, the expectations of appreciation might evaporate and the investors might be impatient in such a situation, and behave emotionally. This is to say, they could leave the market in a hurry. This might not be what you hear in the media or on Internet forums but we’re not in the business of writing what’s convenient, we’re here to give you the facts.
For now, let’s focus on the charts. On BitStamp, we saw back and forth action around the 61.8% Fibonacci retracement level. Does this mean that the move down is now further confirmed? Or might this suggest that we are close to a reversal?
Recall what we wrote previously:
If the situation was a bit unclear previously, it seems much clearer right now. The move below the 38.2% Fibonacci retracement level at $14,276 is now confirmed and we might even get a confirmation in time of the move below the 50% retracement at $12,611. This are extremely bearish developments, possibly game-changing.
Even though Bitcoin went up and crossed the 50% retracement, it didn’t reach the 38.2% retracement. And the move up was on low volume. The appreciation was quickly erased yesterday and this trend has continued also today. At the moment of writing, Bitcoin is lower than when we opened the hypothetical shorts, so the situation is definitely not bullish. The short-term indications are pointing to the conclusion that the appreciation was a counter-trend bounce.