Have You Heard the Starting Shot for Bitcoin As Well?

Just a few days ago on the 25th of October 2019, the price of Bitcoin surged by a staggering +42% within 15 hours representing one of its biggest moves since its inception in 2009. Even for a volatile asset class, this move was very big — BTC jumped 3,000 points from $7,300 to more than $10,400. It is interesting to note that Bull markets often start with an exciting initial move that makes market actors aware of the fact that something is going on.

What might actually have happened that made this a special event to remember? I think we just witnessed the birth of the Institutional market in Bitcoin. For the last 10 years, the Crypto market was dominated by the retail crowd and many traders were able to capitalize on huge gains. Since its inception, Bitcoin has increased astonishingly by more than 800 million percent. There is little or no comparison in history for this kind of gain!

The Blockchain Technology that is behind cryptocurrencies is truly disruptive though still in the infancy stage. You can compare Blockchain Technology to the Internet in the early 1990s. Since then, the Internet has transformed our lives and completely transformed the way we do business. I think we can expect a much bigger impact with Blockchain Technology within the next 10-20 years.

For some years now, Institutions have longed to invest in this dynamic new asset class. For a number of reasons, however, they were not allowed to do so:

• The Crypto market is very small and illiquid for large orders (even today its market cap accounts for only 2% of that of Gold).
• The Crypto market is unregulated. As there is no centralized price mechanism, bigger orders can substantially move the market and price is susceptible to manipulation.
• Institutional investors (such as insurance companies, pension funds and hedge funds) have to follow strict guidelines about investments and how they are held. For many institutions, cryptos have not met those criteria.

Much of this, however, just changed recently.

Institutional Market Expansion

Since opening just a few weeks ago, the new Bakkt Bitcoin platform meets the restrictive criteria for Institutional holdings providing the necessary infrastructure for Institutions to invest in BTC. Bakkt offers physical Futures delivery with Daily and Monthly expiries. The physical delivery for these Futures contracts closely ties the contract price mechanism closely to the daily spot Bitcoin market. This makes the price mechanism highly reliable and nearly impossible to manipulate. The platform is regulated end-to-end and incorporates a digital warehouse (with insurance coverage) allowing institutions to safely store their digital assets. Bakkt has changed the game enabling for the first time, institutional scale investments in BTC. Though the process has been slow in starting, institutional market expansion is now likely to grow gradually from month to month in the coming years. Would you like to front run the large but slow moving institutions? If so, then now might be a good time to start.

As mentioned, Institutional investors have been desperate to get exposure to Bitcoin for some time. Why? Partly because Cryptos are a new and dynamic asset class which has performed very well in terms of capital gains. More than that, however, Cryptos are non-correlated with other asset classes such as Equities, Fixed Income, Gold, or Real Estate. Adding just a small percentage of BTC – let’s say 1-3 percent – to a balanced investment portfolio improves returns and also smooths the equity curve Once Bitcoin has become widely accepted by Institutions as an important portfolio diversification play, the price of BTC could print well above the $100,000 level.

Bitcoin’s Long Signal from the Gecko Pattern

Let’s look at two Bitcoin price charts. There has been a long-stretched consolidation around the big number price of $10,000 After falling well below that level in September, it recently popped above it again a few days ago. And with that last move up, BTC triggered a Long entry the day the Base was re-broken (see Futures System 1 / Gecko pattern). The initial stop is very well-protected at a dominant low. Clearly, the required increased volatility — which is the most important part of the system – came into the chart with the Test Bar (big red bar) and showed again at the recent up move with bull strength. These two volatility occurrences nicely map the emotional battle which has trapped long-standing investors out of a good position (long) and recent bears (short) into bad trades. This was a double market trap but the recent bull strength indicates bear capitulation and thus the end of emotional war. (Note for my students: the Futures System 1 does not require a price consolidation but it makes it an even better signal.)

With BTC’s price currently below the trade’s entry price at $10,000, this trade is available at a price discount. Even with an entry at the “full” $10,000 price level, the reward-to-risk is respectable at more than 11:1 (with a price target of  $40,000). For timing reasons I am waiting, however, for price to pullback towards the 200SMA (thick green line) to further  reduce my risk. Note: for longer-term Crypto trade idea like this one, I invest directly in the Bitcoin Blockchain and avoid a Futures position which must endure the risk of weekend gaps.

By itself, this trade is already a great trade opportunity, however, the weekly price bars tell a larger story. The weekly Bitcoin price chart also triggered a Long entry for the Gecko system a couple of months back. Subsequently BTC made a nice move higher cutting through the stop-run levels (see below). Whenever that happens, price action and market participants need a “refresher” before the trend continues. The recent daily bar pattern as discussed above represents this “pause in the chart”.

Thus the daily trade signal is a pattern within an overall weekly pattern which together, provides an even better reward-to-risk. With the aggressive target from the Weekly pattern at $100,000, there is a huge opportunity for a 30 bagger here. From a reward-to-risk perspective, I know of no better trade opportunity in the financial markets right now.

Go Long Bitcoin Now?

Is right now the best moment to go Long BTC? Truly, I do not know for sure and you should always apply prudence, however, based on my Gecko trading system rules, BTC has two valid entry signals. These are a strong indication of a low-risk trade that might go a long way towards its $100,000 target.

In every case, you should apply prudent risk management. In the case of crypto positions, “prudent” means risking only capital which you can afford to lose — entirely. Between technology advancements, evolving government regulations, bad actors, and other critical variables, any crypto positions could still go to zero. Yes, Blockchain Technology will revolutionize business as we know it over the next two decades. That might happen, however, with a new generation of cryptocurrencies rather than with the current generation such as Bitcoin. Even if the current batch of crypto symbols do continue to advance as Institutions begin buying and holding them, you can be sure to experience huge price spikes up followed by deep drawdowns for the years to come.

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Video: Current Opportunity in Bitcoin Long

In this video I am discussing the current opportunity in Bitcoin together with additional rational for the trade. With a potential reward-to-risk of >30:1, this trade offers the possibility of an outstanding return with low risk.

Since the beginning of the year 2019, I had provided regular analyses on the Bitcoin price structure. These have been very precise in describing what price action was about to do at important decision points. Some of these have been related to Gecko patterns (both Weekly and Daily chart) as discussed in the article. To get a clearer understanding of the chart dynamics at the time and to put the current charts in context, I suggests you to watch the last couple of video updates on the BTC chart.