Bitcoin. Bitcoin. Bitcoin. If you say it enough times out loud will it make it real? Just kidding.
Yes, bitcoin is real and yes, it had a parabolic rise and is experiencing a rapid fall. The Hal March $64,000 question is: what now?
As a former commodity analyst I would love to have a supply/demand balance sheet of bitcoin -- beginning stocks, production, total supply and demand figures and ending stocks. I would love to know about the volume being traded, about the pockets of the traders and who are the traders and producers? Consumers? Speculators?
Basically we have price and price-based indicators. Let's see what we can mine.
In the daily bar chart of the NYSE Bitcoin Index, below, we can see the closing price going back 12 months. There have been some sharp but not durable rallies but the trend is clearly down -- lower lows and lower highs. The ranks of bitcoin believers have shrunk and the number of stories on these new "currencies" have also declined.
Momentum has yet to show a bullish divergence and the Moving Average Convergence Divergence (MACD) oscillator is below zero and pointed lower. Not pretty.
In this longer-term chart of the NYSE Bitcoin Index (below), I used a log scale to show the dramatic move up. Support and resistance may work if we assume that traders or their quant models actually remember. There is some potential support in the $3,000-$2,000 area from April-June of 2017 but it is doubtful if it will hold.
I would bet that there are traders out there figuring out the next Fibonacci support level, the next percentage retracement, the next level they hope will hold.
In this Point and Figure chart of bitcoin, below, we can see a potential downside price target of $956 (I think I just heard someone drop their coffee mug).
Bottom line: Flipping two condos in Naples, Florida before they close, tulip bulbs, land in Florida in the 1920s, the South Sea bubble, pot stocks, Mega Millions. Maybe this was a true mania that has gone bust. We will see how history judges it. Meanwhile, prices are under selling pressure and potential chart support may evaporate. Bounces will probably happen, too.