Category Archives: Bitcoin

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.

On December 18, 2013, we said the following of Bitcoin (found here):

“…in the last 24 hours, Bitcoin has declined as low as $455.  This suggests there there could be a significant appreciation from the current level as the conservative downside target has been achieved.”

The rise in Bitcoin from the low of $455 by +123% in less that one month seemed substantial enough.  However, the recent declines in Bitcoin require us to reassess the potential risks and rewards going forward.

In the last few days, Bitcoin has experienced extreme volatility in its price when it fell -32.7% from the intermediate peak experienced on January 5, 2014 at $1,015. We’re now faced with the potential for Bitcoin to achieve the ascending downside target of $412.65 (now at approximately $570) followed by the worst case level of $200 (ascending red line). 

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.

Finally, the extreme upside target is $1,606.95 and the conservative upside target is $1,071.30.  These upside targets are only valid if the price of Bitcoin is on the rise above the $412.65 ascending line. 

***Anyone venturing into the world of Bitcoin for the purposes of speculation should assume that all funds put forth will be lost.

On November 19, 2013, we provided our best estimates of what the downside and upside targets were for Bitcoin (found here).  In our assessment, we said the following:

“Our conservative downside target for Bitcoin, based on the peak closing price of $785.50 is $384.83.  The extreme downside target is $261.83.  The worst case scenario is for Bitcoin to fall as low as $152.83 as indicated by the red line on the chart.

As we’ve written many pieces on the topic of Edson Gould’s Speed Resistance Line, we’ve made some observations that we think should be highlighted at this time.  For the first time, we’re going to provide what we believe might be an upside target.  In the case of Bitcoin, the next conservative upside target is $1,154.49 if the most recent peak of $785.50 is exceeded.  This is a tentative estimate based on observations of the many successful downside SRLs that we have run in the past.  We’ll be on the lookout for what may come next.”

The most updated Bitcoin chart demonstrates the value of Edson Gould’s Speed Resistance Lines’ ability to give informed estimates of upside and downside targets.  In the case of Bitcoin, The upside target was achieved and exceeded by 7.23%.  After achieving the upside target, Bitcoin has declined from the recent peak of $1237.96 down to the conservative downside target of $535.65.  The conservative downside target is based on the updated peak in the price for Bitcoin using the guidelines for Gould’s Speed Resistance Lines.

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.  However, in the last 24 hours, Bitcoin has declined as low as $455.  This suggests there there could be a significant appreciation from the current level as the conservative downside target has been achieved.  Our revised upside target is now $1,606.95.

Those willing accept the extreme volatility and political risk should seriously consider Bitcoin at or below the $412.65 ascending line with a willingness to see a decline of –62.96%.

It seems that Bitcoin has experienced a temporary peak in the price.  No better time to assess what the downside targets might be for a price that has had a parabolic increase.  In the last assessment of downside targets done on April 10, 2013 (found here) when Bitcoin was at $237.56, we said the following:

“Because the nature of parabolic peaks is to crash disastrously explains why the more moderate peaks of January 2012 and July 2012 did not give up more than 66% of the previous increase.  The current parabolic increase in Bitcoin has a conservative downside target of $89.45 and an extreme downside target of $76.05.”

After our April 2013 downside projection, Bitcoin fell as low as $68 depending on the source as indicated in our June 26, 2013 review (found here).  However, regardless of the source, Bitcoin declined below the extreme downside target of $76.05.

Our conservative downside target for Bitcoin, based on the peak closing price of $785.50 is $384.83.  The extreme downside target is $261.83.  The worst case scenario is for Bitcoin to fall as low as $152.83 as indicated by the red line on the chart.

As we’ve written many pieces on the topic of Edson Gould’s Speed Resistance Line, we’ve made some observations that we think should be highlighted at this time.  For the first time, we’re going to provide what we believe might be an upside target.  In the case of Bitcoin, the next conservative upside target is $1,154.49 if the most recent peak of $785.50 is exceeded.  This is a tentative estimate based on observations of the many successful downside SRLs that we have run in the past.  We’ll be on the lookout for what may come next.

On April 10, 2013, we posted the SRL for Bitcoin, the electronic “currency” (found here). The goal was to was see if we could determine the downside target using Edson Gould’s Speed Resistance Lines (SRL). Based on the published chart, we had a conservative downside target of $92.57 and an extreme downside target of $79.18.  The chart below depicts the outcome, so far:

Depending on the source, on an intra-day basis, Bitcoin fell at or below the extreme downside target as projected.

After seeing a discussion of Bitcoin on Bloomberg (found here) we decided to run Edson Gould’s Speed Resistance Lines (SRL) on the “currency.”

The most important feature regarding this SRL analysis is precedence.  Without precedence we could not ascribe any amount of confidence to what is in the chart.  Of course, the precedent that we’re referring to is the peak in the price near June 2011.  At that time the peak price was $31.90.  Based on the SRL for that period, the conservative downside target was $17.24 and the extreme downside target was $10.36.  In each case the price of Bitcoin declined below both level and on a resounding basis.  The ultimate low after that parabolic peak was $2.30 in late December 2011, a decline of -92.78% from the peak.

Because the nature of parabolic peaks is to crash disastrously explains why the more moderate peaks of January 2012 and July 2012 did not give up more than 66% of the previous increase.  The current parabolic increase in Bitcoin has a conservative downside target of $89.45 and an extreme downside target of $76.05.  However, if Bitcoin were to experience a -92% decline as it had done in 2011 then there is the potential for a decline as low as $16.45 which is slightly below the technical base of $21.10.

While technical analysis is considered voo-doo at best, we are trying to determine the limits of Edson Gould’s SRL.  So far, Gould’s SRLs have given accurate downside targets for Apple (AAPL), Green Mountain Coffee Roasters (GMCR), Herbalife (HLF), Chesapeake  Energy (CHK), BMC Software (BMC) and Silver or iShares Silver (SLV).  This is 54% of all the SRLs done on our site.  There are two SRLs that are still on their way to providing an accurate downside target and that is Randgold (RGLD) and Philadelphia Gold and Silver Stock Index (XAU), 18% of the SRLs run.  Twenty-seven percent of SRLs that have failed are Priceline (PCLN), Chipotle Mexican Grill (CMG) and Clean Harbors (CLH).  All of the SRLs and their success and failure can be (found here).

Note: Diamond Foods (DMND) has been excluded from the SRL count since DMND was done after the downside targets were achieved.