Bitcoin - The BIG Short Trap? Not So Fast
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As Bitcoin' attempts to reverse and form a bullish move, these initial swings hardly ever pan out. To Be Clear I am Bullish Long Term, but in the short term it is likely we see some additional pain.
Short Interest:
Everyone is now talking about short interest, but most do not understand how markets work and the flow of money. So they put up long and short interest doing comparisons. There is no comparison, short interest carries more weight when it pertains to money flow.
Often I look at taking the opposite side of the trade to look for levels that are of interest of mine. I will paper trade a short position here. As I detailed in my article last night on S.C. the important level to push through for longs, is around the 6650 area. Looking at the short interest and how it played out during the previous selloff provided some insight as to the flow of money, and more importantly how shorts are thinking.
Of course this is just my opinion, but the evidence is shown and detailed clearly on the chart.
Searching 4 Stops:
Initial resistance is at the 6610 level. There was a long trigger recently and just below this level is where we would expect swing traders to exit. Because of the structure of Bitcoin' at the moment this is a higher risk trade and not one that fits our conservative swing trade philosophy. These are very subject to throwbacks and breakdowns quickly and whether it happens or not, this is that type of structure. Very typical for anyone that has traded Forex.
You get the trigger, up 30-40 pips, and then the rug is pulled out. Of course unlike the Forex market you are at least trading against an open market and other traders. This is why 90% of Forex traders lose money. Your playing against the house.
I mention this because this is where we can search for stops. I have mentioned prior that large firms spend a lot of money stop searching, then calculating the cost of strategy for using this to their advantage. How many times have we been in a Forex trade, only to get knocked out before a rally? Because the broker can see your stops! This happens in the metals market as well. So if "manipulation" happens in those markets, it is bound to happen here. This is why obvious setups seldom work. You are almost always playing against the house.
Currently the trade would be short for 5500-6000. A break through 5800 would send panic, and panic feeds into the frenzy of larger players. Money always flows from weak to strong hands and this is an area where we can look for a reversal and swing trade long. Since we do not short these markets on leverage we use an alternate method used by gold dealers for years. Some are focused on P&L gold dealers are focused on coin accumulation. That is the same philosophy with our strategy. It is a slow moving strategy, but one that allows you to trade both sides of the market without using leverage.
Bull vs Bear vs Consolidation:
The 5500 level is the key level that takes us from a consolidation market to a bearish one. We are taking some precautionary measures with our portfolio in the event this happens. This does not imply we are selling, but reducing our risk in a small amounts with specific coins.
Keep in mind there is a lot of noise in markets, and many throw up bull and bear markets based on whether the market is currently going up or down. This is a shallow view of the market as a whole. From a traditional standpoint we are in a consolidating market which started in June. We have not seen a convincing lower low, and Bitcoin' has failed to make a new high. From a shallow standpoint many would think this is a continuation pattern to the bearish side with a big triangle. However as shown below on the monthly it appears more of a continuation pattern in a broader bullish move.
Bitcoin' is NOT Dead:
The first I ever saw Bitcoin' used for anything was Pinehurst coins. In covering a sell order for gold', I noticed they offered a discount for Bitcoin'. To be honest I thought at the time Bitcoin' was a fraud, but to see it as a payment alternative had me wondering. For those that do not understand how the metals market works, this was huge.
Normally I would have to place an order, go to the bank and send out a cashier's check or bank wire. I could also send a personal check, but then you waited 7-10 days for the check to clear before they would send you your gold'. Bitcoin' changed this. Unlike paying with a credit card or PayPal' I kept the 4% cash discount. Hello! In the gold market 1-2% is the typical profit, so paying 4% makes it a loss.
Even Apmex takes Bitcoin' & Bitcoin' Cash' now, and makes the transaction that faster which is key when placing orders. Dealers do not have to retain as much inventory to meet orders because the processing time is greatly reduced. Nothing like waiting 2-3 weeks to replace your inventory. Provident metals has been taking it since 2014 and still does offering a 3% cash discount. So tell me again Bitcoin does not have real world applications?
A Really Important Adoption:
Companies that accept Bitcoin' in addition to most major metals dealers are Expedia', Etsy', Dish' Network', Microsoft', Newegg, RE/Max London, Reeds Jewelers, Tesla', and the most interesting Intuit'. Yes the maker of Quickbooks' has integrated their accounting software for retailers that accept Bitcoin'. These companies are not crappy internet companies these are major brands. The fact quickbooks' now integrates payments will allow more retailers to enter the space. We can now send an invoice out with a payment option of Bitcoin.
As the payment space grows Bitcoin' will begin to grow as well. Like I said I was a disbeliever until I saw it had applicable use in the metals market. This space is growing not consolidating.
Still Bearish in the Short Term:
IN THE SHORT TERM BITCOIN IS LIKELY TO RETEST THE CURRENT LOW OR THE 5500-6000 AREA. This is what we are positioning for and taking a small strategic measure to minimize some risk, yet keep us in the market in the event it rallies. You just never know. This also allows us the potential to increase our coin count WITHOUT adding new money, and not utilizing leverage.
Before posting "perma bull" or "your always long" please read that statement. The long is because long term I believe we move and retest the ATH. So all my positioning is with that belief. Now if you believe Bitcoin' is useless and is hellbound for zero, fine. You are entitled to your opinion, and the future will determine who is right, not screaming and posting 50 charts in the comment section.
Short Interest:
Everyone is now talking about short interest, but most do not understand how markets work and the flow of money. So they put up long and short interest doing comparisons. There is no comparison, short interest carries more weight when it pertains to money flow.
Often I look at taking the opposite side of the trade to look for levels that are of interest of mine. I will paper trade a short position here. As I detailed in my article last night on S.C. the important level to push through for longs, is around the 6650 area. Looking at the short interest and how it played out during the previous selloff provided some insight as to the flow of money, and more importantly how shorts are thinking.
Of course this is just my opinion, but the evidence is shown and detailed clearly on the chart.
Searching 4 Stops:
Initial resistance is at the 6610 level. There was a long trigger recently and just below this level is where we would expect swing traders to exit. Because of the structure of Bitcoin' at the moment this is a higher risk trade and not one that fits our conservative swing trade philosophy. These are very subject to throwbacks and breakdowns quickly and whether it happens or not, this is that type of structure. Very typical for anyone that has traded Forex.
You get the trigger, up 30-40 pips, and then the rug is pulled out. Of course unlike the Forex market you are at least trading against an open market and other traders. This is why 90% of Forex traders lose money. Your playing against the house.
I mention this because this is where we can search for stops. I have mentioned prior that large firms spend a lot of money stop searching, then calculating the cost of strategy for using this to their advantage. How many times have we been in a Forex trade, only to get knocked out before a rally? Because the broker can see your stops! This happens in the metals market as well. So if "manipulation" happens in those markets, it is bound to happen here. This is why obvious setups seldom work. You are almost always playing against the house.
Currently the trade would be short for 5500-6000. A break through 5800 would send panic, and panic feeds into the frenzy of larger players. Money always flows from weak to strong hands and this is an area where we can look for a reversal and swing trade long. Since we do not short these markets on leverage we use an alternate method used by gold dealers for years. Some are focused on P&L gold dealers are focused on coin accumulation. That is the same philosophy with our strategy. It is a slow moving strategy, but one that allows you to trade both sides of the market without using leverage.
Bull vs Bear vs Consolidation:
The 5500 level is the key level that takes us from a consolidation market to a bearish one. We are taking some precautionary measures with our portfolio in the event this happens. This does not imply we are selling, but reducing our risk in a small amounts with specific coins.
Keep in mind there is a lot of noise in markets, and many throw up bull and bear markets based on whether the market is currently going up or down. This is a shallow view of the market as a whole. From a traditional standpoint we are in a consolidating market which started in June. We have not seen a convincing lower low, and Bitcoin' has failed to make a new high. From a shallow standpoint many would think this is a continuation pattern to the bearish side with a big triangle. However as shown below on the monthly it appears more of a continuation pattern in a broader bullish move.
Bitcoin' is NOT Dead:
The first I ever saw Bitcoin' used for anything was Pinehurst coins. In covering a sell order for gold', I noticed they offered a discount for Bitcoin'. To be honest I thought at the time Bitcoin' was a fraud, but to see it as a payment alternative had me wondering. For those that do not understand how the metals market works, this was huge.
Normally I would have to place an order, go to the bank and send out a cashier's check or bank wire. I could also send a personal check, but then you waited 7-10 days for the check to clear before they would send you your gold'. Bitcoin' changed this. Unlike paying with a credit card or PayPal' I kept the 4% cash discount. Hello! In the gold market 1-2% is the typical profit, so paying 4% makes it a loss.
Even Apmex takes Bitcoin' & Bitcoin' Cash' now, and makes the transaction that faster which is key when placing orders. Dealers do not have to retain as much inventory to meet orders because the processing time is greatly reduced. Nothing like waiting 2-3 weeks to replace your inventory. Provident metals has been taking it since 2014 and still does offering a 3% cash discount. So tell me again Bitcoin does not have real world applications?
A Really Important Adoption:
Companies that accept Bitcoin' in addition to most major metals dealers are Expedia', Etsy', Dish' Network', Microsoft', Newegg, RE/Max London, Reeds Jewelers, Tesla', and the most interesting Intuit'. Yes the maker of Quickbooks' has integrated their accounting software for retailers that accept Bitcoin'. These companies are not crappy internet companies these are major brands. The fact quickbooks' now integrates payments will allow more retailers to enter the space. We can now send an invoice out with a payment option of Bitcoin.
As the payment space grows Bitcoin' will begin to grow as well. Like I said I was a disbeliever until I saw it had applicable use in the metals market. This space is growing not consolidating.
Still Bearish in the Short Term:
IN THE SHORT TERM BITCOIN IS LIKELY TO RETEST THE CURRENT LOW OR THE 5500-6000 AREA. This is what we are positioning for and taking a small strategic measure to minimize some risk, yet keep us in the market in the event it rallies. You just never know. This also allows us the potential to increase our coin count WITHOUT adding new money, and not utilizing leverage.
Before posting "perma bull" or "your always long" please read that statement. The long is because long term I believe we move and retest the ATH. So all my positioning is with that belief. Now if you believe Bitcoin' is useless and is hellbound for zero, fine. You are entitled to your opinion, and the future will determine who is right, not screaming and posting 50 charts in the comment section.
Note
P.S. The arrows are indicative of a pattern not Time. So please understand we do not expect this to evolve over the next 48 hours though possible. This is the structure we are looking for.Note
I noticed that I forgot to post the short chart posted. Good time for an update, note that short interest is not waning much. As I mentioned the large dip provided an opportunity for shorts to lock in some gains. This provides some cushion and allows them to hold tight even with lowering their Stop Loss position. 
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