So, if you owned Bitcoin would you sell them and if so would you put the proceeds in a traditional bank in your local currency, buy gold or buy equites at this point in time?

Eoin Treacy's view

Thank you for this question which may be of interest to other subscribers.

The answer is going to depend on three important characteristics. The first is whether one is leveraged or unleveraged. The second is how easy is it to sell. The third is whether there is evidence of top formative completion.

While futures at the CBoT, and now the CME, introduce leverage to market, and UK investors have had access to spread-bets and CFDs for some time, it is reasonable to conclude that the majority of participants are doing so on a cash basis. Therefore, they are more interested in the percentage gains, or indeed declines, rather than the number of points moved.

One of the problems people are having today is that execution times are rather lengthy at the major bitcoin exchanges and this is exacerbated during times of high volume. Here is an important section from a help page on Coinbase:

Sometimes there is a high volume of digital currency being sent globally, and there are more transactions than there is space available in each new block to include the transaction.

Fear of missing out makes people reticent to sell but if execution is an issue then pre-emptive selling has to at least be on the menu.

The pace of the advance was already impressive this year but it really took off in mid-November. In that time reactions of around $2500 were ‘normal’ but the reaction on December 8th was over $3100. The question I have to ask is whether this larger reaction is the acceleration losing consistency at the penultimate high? Accelerations often climax in a massive reaction against the prevailing trend.

This year has provided a staircase step sequence uptrend which means there have been no failed upside breaks this year. Therefore, a Mid-Point Danger Line (MDL) stop, as taught at The Chart Seminar, is worth considering at this stage. That would put the stop in the middle of the most recent range which would be around $16,300.

Think about it this way, in order for the price to repeat its 2017 performance in 2018, it would need to close at the end of December next year at more than $365,000. Even if one were to accept that as a reasonable target there is still an argument for treating the acceleration as an ATM rather than a long-term buy and hold strategy. Therefore, I think taking some profits off the table following such an impressive run is logical because you still have a choice. The problems with execution during a pullback will take that choice away.