The bitcoin crash – as it happened

I’ve been covering bitcoin rather a lot lately, so I was planning to write about something else this week.

But then Monday happened.

There’s this ridiculous expression that people often use about something extreme. They say “it can only be described as” and then insert some word. Well, there a number of words you can use to describe Monday in cryptocurrency land.

I’m going to go with “carnage”…

Trying to write about bitcoin while it’s crashing is tricky

I’m in Asia this week (lucky me) giving some talks for the EO Network in Singapore, Malaysia and the Philippines on bitcoin.

As I finished my talk in Kuala Lumpur, somebody from the audience came up to me, holding her phone, and said: “Bitcoin’s fallen by $2,000 in the 90 minutes you were up on stage.”

She was right.

It was down by about 20% on the day. And bitcoin was one of the better crypto performers.

Below is a screenshot taken from coinmarketcap showing the state of the 15 largest cryptocurrencies. There are 25%, 30%, even 40% corrections across the board – 40% in 24 hours! Red is everywhere. It does not make pretty reading.

Crypotocurrency currency table

Well, the party was going to end sooner or later. So is this it – is the bubble finally popping?

Maybe some aggressive buying comes in now that turns it all around. But it’s hard to see how the sector, in the short term, can survive this level of aggressive selling. There’s a scramble to protect profits, while those who bought at higher levels are bound to be panicking.

I’m concerned that there might not be that many willing buyers. Most of those who were likely to come in on this run are already in, I would have thought. Those who stayed out will mostly stay out – it takes strong nerves to buy into corrections like this.

But I say all this with the strong disclaimer: bitcoin had five corrections last year of more than 20%, during which it went from $1,000 to $20,000.

It’s bitcoin. The mistake has always been to underestimate it…

But this correction, I don’t know, feels different somehow. The market’s exhausted. It needs to pull back.

When I look at the chart, I can see the massive run from around $1,000 to $20,000; a sell-off; and then a rather flimsy rebound to $18,000.

I can’t help thinking it rather looks like a top.

I see the $10,700 area as important. That was the low in the initial sell off last December. If it can hold, and we can consolidate above $10,000 for a while, then maybe the game is still on – oh, my goodness me!

Literally as I wrote that last sentence, I went to look at the chart again and $10,700 has just been breached. My gosh, this market moves fast! If nothing else, it’s mighty exciting. I feel like I’m covering the crash in real time.

We’re now at $10,300. We’ll probably be back up above $12,000 by the time you read this!

The dangers of trading bitcoin

My gosh, you need nerves of steel if you’re going to try and trade this thing. I do not recommend it. For all you know you’re probably up against an army of computerised models, black boxes and algorithms (perhaps they will be the strong buyers this capitulation needs).

I mentioned last week that I had bitcoin on a sell signal, based on my simple system of moving-average crosses. Here’s what I was talking about.

I use the six- and 21-day moving averages (hat-tip to trader Vince Stanzione for putting me onto this particular pair).

The green line is the 21-day moving average, the red line is the six-day moving average. Basically, when the red line crosses up through the green that is your buy signal (black arrows). When the red line crosses down through the green, that is your sell signal (blue arrow).

Bitcoin price chart

This system works beautifully in a trending market – and you caught the lion’s share of the run up – but in a range-trading market, it does not work anything like as well. In the volatility of the last month, the system gave false signals twice. But the sell signal from a week ago is currently working.

I stress this is a short-term trading signal, using one simple strategy that does not work 100% of the time (nothing does). That is not me telling you to rush out and sell all your bitcoins.

Heck, I’ve just looked at the chart again. In the time that I wrote the last few paragraphs, we’ve now gone through $10,000 and bitcoin has got a $9,000 handle!

How low does it go? That, of course, nobody knows. Bitcoin has had five 80% corrections in the past. So an 80% correction would be nothing new. We’re already down 50% from the December high of $20,000.

An 80% correction would take us down to the $4,000 area. That would unwind the entire mania since the autumn.

Staring at the chart, I can’t help thinking that $3,000 is a possibility.

But, who knows? It’s bitcoin. Anything is possible. It could just as easily go to $50,000. All I can say for sure is that the whole picture could have changed again by the time you read this.

But trade it at your peril. I’m afraid to say there are so many newbies in this game. For sure, their risk is not going to be properly managed. That only adds to the volatility.

Make sure your risk is managed. A lot of people are going to get hurt. Don’t be one of them.

It’s a speculative mania. But it’s also the future. Enjoy the ride!

Dominic Frisby is the author of Bitcoin: the Future of Money?

  • Nick

    Yes, and Waitrose have managed to drive the ‘price’ of the Daily Mail to zero. I know this to be a fact…. 😀

  • Chris Narbeth

    Dominic
    As a complete Bitcoin and any other coin IPO sceptic, what exactly is to prevent Jamie Dimon and JPM together with Lloyd Blankfein and Goldman Sachs buying up the genuine blockchain technology that proves to work in a real commercial fashion with good old US dollars when they deem it appropriate ?
    And why exactly would the relevant tech entrepreneur turn down their $1billion of ‘real cash’ in preference for his 10 trillion of quasi digital value as recorded on Coindesk website with precisely zero chance of conversion to usable currency ?

    • It is open source, you don’t have to buy it as it is ‘free’. Not everything can be ‘bought’ – how to buy out The Internet? I suggest reading and understanding what blockchain tech is really about if you want to have an informed opinion. As the author ended the article despite his investment warnings, it is very likely the future…

    • roshan.perera

      What’s the value of internet and how do you evaluate its value? Same goes to blockchain.

    • Gary

      The very banks you mention and more are embracing the blockchain technology for their back-office accounting and other tasks. A software that’s self-checks, is error free and synced with AI has the potential to reduce overheads, in particular IT, accounting and banking staff. I believe the software will be more of a game changer in the employment world than AI. Secondly for me bitcoin will always be around. It’s not going anywhere. There are plenty of buy/sell transactions around the world carried out by people that don’t want to be known. Whilst they are able to transaction in a currency that allows this it will simply grow in value with increased use. Instead of handing over suitcases with cash/gold/diamonds or opening off shore accounts in increasingly indiscrete tax havens one can use bitcoin. Selling weapons to mercenaries (CIAchoo), laundering money (CIAchoo), avoiding tax on huge transactions, or buying drugs in Afghanistan and selling to the big boys (CIAchoo), these currencies offer a compelling solution to both large and small crooks. The more use the higher the demand and the higher the value of bitcoin.

  • roshan.perera

    Collection of negative news (some are invented) and crash of ponzi scheme called bitconnect is what we see today. Amateur investors who through this was a great get-rich-quick method are the one who are selling FUD. Bitcoin will fall and will rice again as it did before, because this is backed by a technology called blockchain which will thrive in the future. $8000 is the next resistance and if it falls below $8000 it will most likely stop at $5600 and that’s when the greed kicks in, buyers start pouring in. I think if you own bitcoin, don’t sell. If it holds $8000 for a few days then buy more. Also, regulation is a good thing and I don’t understand why people see oversight as a crackdown. Without oversight stock market will look exactly like this.

    • Bab Boon

      Yeah? But the market doesn’t have major nation states opposing it – China & South Korea forbidding crypto currencies, Singapore restricting them and others no doubt to follow.

      So that’s not even an Apples & Oranges comparison, more like fruit & breezeblocks.

      Blockchain may turn out to have long term benefits – or not – but the fact its integral is barely significant to overall values or prospect…. its not a magic wand.

      • roshan.perera

        Total bullcrap. So your major nations are what, the US and the UK? Do you know that Asia is heavily in crypto and what happens there matters to crypto a lot? Blockchain’s value and its future can be foreseeable based on its interest and its adoption by banks, money exchanges and even governments, and you obviously have no idea what it is. Of course its not magic beans and I never said it was but it will replace the current SWIFT based transaction system soon, which accounts to billions of transactions daily. BTW what was the Apple and Orange here?

        • TheInternetToughGuy

          Mystic Meg has spoken!

          • roshan.perera

            Run away kid. Wasting my time

    • TheInternetToughGuy

      Spoken like a true expert with fully functional crystal ball

      • roshan.perera

        You kids should need it.

  • Johnny

    The Bitcoin journey has a very long way to go and I can see the price more than doubling from its current level in the next few months. Every dip is a buying opportunity.
    I’m invested in a Bitcoin Tracker and it is up a ridiculous 20% today having been down as much yesterday. It is a thrilling roller coaster ride but worth the thrill if you limit your investment to a maximum of 1% of your net worth. You might want to adjust this on an annual basis, especially if you experience some of the forecast gains of up to 800% for 2018. Nobody knows for sure where this will go but you shouldn’t put yourself in a position of anxiety by investing what you cannot afford to lose.

    • Jonathan Rose

      I sold some of my BTC at 18.5k taking my average cost per BTC to 2k. Same with ETH…… I sleep better at night. Its less than 1% of my net worth too….

  • Beautyon

    Bitcoin can’t “crash” https://hackernoon.com/why-bitcoin-cant-crash-9268c874234c anyone that says that it has “crashed” doesn’t understand how Bitcoin works, and is looking at the entire subject through the wrong end of the telescope.

    • TheInternetToughGuy

      Um, you’ve badly mis-understood that article. Or maybe read it through the wrong end of an anoscope.

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