That Elliot Wave analysis is starting to look more and more correct.  Depending on where you draw it, we're either around or below the neckline of a head-and-shoulders pattern developing on the daily chart, which could take us down to the $3000-ish area.  That, combined with sitting on the 50-day moving average, does not bode well for the short-term price outlook if we can't bounce right here.

As I said earlier, I don't think that bitcoin will replace the dollar as a global reserve currency.  However, there is a small chance that one day it could be more accepted or "valuable" than the dollar (I don't mean 1 dollar vs. 1 bitcoin, of course).  If the US defaults on its debt, which, while considered unthinkable at the moment, will become more and more likely as we keep spending beyond our means, the dollar would lose its reserve currency status, and bitcoin might, in some ways, become more mainstream.

I'm hoping that China doesn't ban bitcoin--it doesn't seem very likely that they would outright ban it.  But if they do, the Chinese are going to dump like there's no tomorrow because for them there would be no tomorrow.  If China shuts down all of their exchanges, it's going to be much harder for the Chinese to turn their bitcoin into yuan, and there are a lot of people, especially the miners, who are going to want to get out immediately.  I could see a scenario like that being worse than when Mt. Gox died.

Bitcoin certainly won't replace the dollar soon, and it probably never will.  To become a global reserve currency, as the dollar is now, it needs to be widely accepted by (almost) all countries and relatively stable in value, which requires some of way of determining how much it should be worth.  Right now, bitcoin isn't close to having any of these characteristics.  Maybe one day it will--it would be really cool if it did--but it's got a long way to go.  As it is, it's not even recognized by most countries as a currency.

Please be careful that you try to understand why price reacts to different events the way it does.  Don't just assume that because the price jumped after a fork before that it will jump after the next one.  Now, I'm not going to claim that I know for sure why the price jumped after the last fork.  But from what I've read and understand about cryptos and bitcoin, I think the market was already "planning" to go higher at the end of July.  It seemed to pause to see if the bitcoin cash fork was going to happen and if it was going to have a negative impact on bitcoin.  The fork happened, and after a couple of days, when it was pretty clear that the fork wasn't going to hurt bitcoin, the rally resumed.  My point is that we might get a rally after the next fork, but we may not.  Unless there's concern that the fork will mess things up, the fork probably will not cause a rally.

Right now, I think everything depends on what happens with the news out of China.  We did recover quite well after the news of the ICO ban, so I don't think that's too much of a concern in the longer term.  But the real question right now is about China's bitcoin exchanges as Chinese trading and bitcoin ownership make up a decent chunk of the market.  Participants appear to be waiting to see whether China is going to do anything about existing cryptos.  If they do, for example, ban bitcoin exchanges, the price is likely going to crash hard.  If official news comes out saying that they aren't going to do anything negative, I think we'll see a quick rally up to the $5000 area and possibly beyond.

This is very possible.  But keep in mind that at this point the number of real believers in crypto may be a lot smaller than the number of people who are buying and selling cryptos.  I think that much of the price increase is due to people trying to make money, not because they know or care much about cryptos.  Look at how bitcoin's price has behaved historically.  Every spike during which the price increased by a large factor was followed by selloff of at least 75%, which means most people bailed when the price crashed.  That should give you some idea as to how many people are in it for the money vs. how many are "true believers."

Some governments care more about innovation than others.  Some are more concerned with maintaining control over their financial ecosystems.  And almost all governments try to keep their citizens safe (or use citizen safety as an excuse to try to maintain control over the money supply and/or its citizens).  Not only does this include keeping people from being scammed by things like fraudulent ICOs, but it also includes keeping people safe from illicitly-funded activities (drugs, terrorism, etc.).  In any case, I don't think there are many governments (if any) that would decide not to ban bitcoin/cryptos because they're concerned about stifling innovation.

Agreed.  I think the rise in price has been too fast since we passed $1200 or so.  As with any financial instrument, healthy price growth is slow and steady with retracements and consolidation areas.  When price goes parabolic, you can be sure that you're entering overbought territory.  The question then becomes how far will it go before it corrects, and how will it work off its overbought state.  The latter can be accomplished through a lengthy period of small pullbacks and consolidation, but of course bitcoin's history indicates that a massive crash is more likely.

As many others have said here, the decentralized nature of the bitcoin is part of the reason for the extreme volatility.  There's no centralized entity, like a reserve bank, that can act to dampen the price swings.  Traders/speculators that are constantly buying and selling have an impact on the hour-to-hour price.  And the general lack of liquidity exacerbates the moves.

But one thing that I think most people are missing here is that there's no good way to determine the actual value of a bitcoin.  The value of other currencies is determined by the economies they represent.  The value of commodities (oil, gold, etc.) can be estimated from the amount of time/effort/resources/money that's required to obtain them.  But bitcoin doesn't have anything like that backing it, so there's no way to form a consensus on what it's value should be.  Without that, price is going to continue to swing wildly.

Hopefully the price will not get badly crushed again, but please be very careful about your assumptions.  This is also what people thought back in November/December of 2013 when the price spiked to around $1150.  Everyone thought it was going to keep going up up up.  What happened?  Over the following 13-14 months, the price kept dropping until it bottomed around $150 in January 2015.  That was an 87% drop.  After the previous spike to around $260 earlier in 2013, the price fell to around $63 -- a 76% drop.  As they say in trading/investing, history doesn't repeat itself, but if often rhymes.  Now, cryptos are better established than they were in 2013, but if much of the price runup this year is due to speculation, all of that can just as easily be undone.

I would argue that this kind of price instability is a big deal and overall not good for bitcoin.  On a percentage basis, a change of $500 in one or two days is on the order of 10-12%.  The problem is that this indicates that there is no consensus whatsoever about what the price should be.  People are just throwing money at it, assuming that it's going to keep going up.  This makes a deep correction much more likely as these people are going to panic and sell quickly if/when we get a drop that's more than the expected $500 or so (or if a major support line is breached).

Interesting article.  Thanks for sharing.


I keep struggling to justify the current price of bitcoin as an actual currency/technology.  I think most of the current price is investor premium, which could evaporate very quickly, and probably will at some point.  In any case, while I don't think bitcoin is going anywhere, even in the long term, I don't think it's going to become any kind of default global currency.  I don't see any way of definitively determining what a bitcoin should be worth, which will prevent the price from ever stabilizing for long periods of time.  Without a more stable price, its use in commerce will remain limited.

I agree that it would be just about impossible to completely eliminate bitcoin.  Governments would not be able to effectively prevent personal ownership.  However, they don't need to do that to effectively destroy it.

1) They could make crypto exchanges illegal.  There would inevitably be some rogue ones, but if governments make it illegal for financial institutions to connect with crypto exchanges, it would be really hard to trade in your bitcoin for fiat money or goods and services.  Businesses like Coinbase would go poof, and bitcoin investment companies would also go poof.  As I think that much of the price of bitcoin right now is due to investor premium, this would likely cause a huge crash.

2) They could also regulate it to death.  If they heavily regulate exchanges and/or connections between exchanges and financial institutions, they could box in cryptos pretty well.

There are two sides to the $5,000-coin, so to speak.  Getting up to that level again may indeed be fairly easy, especially given how well the dips continue to be bought.  However, as with any attempt to make new highs, you're going to be fighting the people who bought in at the previous highs and are praying that price returns there just so that they can break even.  Those people will most likely sell as soon as they can so they can rest easier, applying downward pressure once we reach that level.  The other thing to keep in mind is that the up-swing from Aug 22 through Sept 1 was much weaker than the up-swing from the beginning of August to Aug 17, which indicates that the market may be losing momentum.

Oh, and btw, I'm generally not a big fan of what Wall Street analysts have to say without knowing what their track record is.  They are paid to come up with numbers, and they need to come up with some kind of justification for those numbers, no matter the likelihood.  Many of them are lucky to be right half of the time.  And even those that are right more often than not are still wrong sometimes.

I am a big fan of technical analysis, especially in the absence of major news/events.  However, I've never been a big fan of Elliot Wave Theory.  In my experience, it can be hard to figure out where the waves are as charts tend to be pretty sloppy.  Additionally, like so many other analyses (Elliot Wave and others), the EWM Interactive article states a theory about where price is going, but they don't give any historical data for the use of Elliot Wave Theory on BTCUSD.  How many times has this sort of analysis worked in the past?  How many times has it been wrong?

That said, the chart in that article has been a pretty good guess so far.  If it holds, we should be right around point B right now.  I've been thinking that we're about due for a good gut-check correction, especially given how much optimism seems to be out there, and when we broke the old highs around $1100, I thought we might get to around 4x that level before a crash happens.  However, I would also point out that A was supposed to be around 4, and B is supposed to be a little less than 3, which would show weakness and the potential beginning of a downtrend.  In reality, A was significantly higher than 4, and B has surpassed 3, which makes the real chart look like we're very much still in an uptrend.

The bottom line is that I think there's reason to believe that we are nearing or have already hit a short-term top, and could see a major drop in the near future.  But it depends on what price does in the next couple of days.  If we can't break to new highs above $5000, and especially if we break below the last dip around $3900, we'll probably see a big leg lower.

One other thing I'd like to point out here: your exit strategy (panic sell if you're afraid of losing your investment) concerns me.  Without some kind of specific plan and the ability to use that plan to override your emotions, how do you know when to sell?  If you simply use "panic" as a barometer, you will likely sell at the lows, only to see it rebound shortly thereafter because everyone is panicking at the lows.

Also note that if you're watching your investment on an hourly basis, you're trading, not investing.

Right now this is true because of all of the reserve banks trying to keep interest rates low.  But this has not always been the case.  Back in 2006/2007, for example, US inflation was around 3% while you could get around 5% in an online savings account.  You probably could have done even better than that with CDs.


I'm going to have to disagree about bitcoin being a safer investment strategy.  It has certainly been one of the most profitable if you've been willing to hang on to it through the spikes and crashes.  But it is definitely not safer, which is shown by its ridiculous volatility.  If it were really a safe investment, the price would be stable.  The problem is that no one has any idea how much a bitcoin really is or should be worth.

I think this is very good advice.  Tangible assets that maintain value, such as land, are the best way to guarantee (as much as one can guarantee) that you will hold on to your wealth.  No matter what happens, people are always going to want land.  The value and usefulness of bitcoin is contingent upon the availability of electric power and the internet.  If your area is hit by a hurricane, for example, you may not have access to either of these things, rendering your bitcoin worthless, at least for a while.