On December 18, 2013 (found here), we gave an assessment of the downside risk for Bitcoin in the following commentary:
“With the conservative downside target being achieved, the extreme downside target of $412.65 and the worst case level of $152.83 are all that remains.”
On February 8, 2014 (found here), we reiterated downside targets for Bitcoin:
“In many previous examples of Edson Gould’s Speed Resistance Lines, once at the extreme downside target of $412.65, the price usually reverses to the upside. However, failure to do so (reverse at or above the extreme downside target) would mean that Bitcoin could reach $385 before reversing to the upside. If the $385 level fails on the downside then $200 is assured.”
As we speak, Bitcoin sits at the $246 level.
The data that we’re using to plot the price is from Mt. Gox (found here). However, Mt. Gox has put withdrawals on hold until security issues are resolve. Because Mt. Gox put withdrawals on hold they likely avoided illegal activities like the most recent hack afflicting Silk Road 2 as reported by Techcrunch.com.
While there are other Bitcoin exchanges offering higher bid and ask prices, they cannot avoid the reality of the problems that currently plague the Bitcoin market. Leaving aside the possible arbitrage opportunity, Mt. Gox offers up the most extreme and negative price data and appears to be protecting their constituents. These are necessary attributes that make the data being offered by Mt. Gox most realistic and applicable to our attempt at analysis.
In the final review, either the other Bitcoin exchanges will drop to the quoted Mt. Gox level or Mt. Gox quotes will rise appreciably. Regardless, at the current level of $300-$200, Bitcoin is fairly valued.
Anyone venturing into the world of Bitcoin for the purposes of speculation should assume that all funds put forth will be lost.