Bitcoin As An Investment
For a long time I wrote Bitcoin off as nothing more than a purely speculative asset with no real tangible value.
In some respects that still holds true, but with more and more fund managers considering adding it to their portfolio as a way to become more diversified, and as it becomes more accepted as a store of value, I have become increasingly interested in this particular cryptocurrency.
Indeed I am planning to invest 1% of my eToro portfolio into this asset at some point in the future for these very reasons, and am starting to see it as a viable long-term investment for both myself and my copiers.
Downward Price Breakout
The price of Bitcoin has been slowing trending upwards for several months now, and with it trading between $9000 and $10,000, I haven’t been at all tempted to buy in at this kind of price level.
However if you look at the daily price action of Bitcoin just recently, you will see that it has broken below the lower trendline over the weekend and today, indicating that the upward trend may now be over, and we may be seeing the start of a new downward trend.
Therefore I might start becoming more interested in buying Bitcoin if this downward breakout gathers some momentum, and we start to see a serious price move.
At the moment it is too early to tell if this breakout is going to have any real momentum behind it. Ideally we want to see an initial breakout, a pull-back back to the trendline and then a continuation move downwards for confirmation.
If this happens, then we can use fibonacci retracement levels to give us possible price targets, and in this case a 50% retracement of the upward price trend gives us a price of $6989 and a larger 61.8% retracement gives us a target price of $6262.
Either of these two price targets would give me a much better entry point for my 1% investment and would make me a lot more confident about my investment.
Final Thoughts
You may be thinking; is it worth shorting Bitcoin at this point? Well if this was any other instrument and if it had the same chart pattern, then yes it may well be worth opening a short position, but the spreads and fees on Bitcoin are simply too high for my liking.
Furthermore, with Bitcoin there are no fundamental reasons why the price should be higher or lower than it’s current value because nobody knows what it’s true value actually is. It is driven purely by volume of buys and sells, ie sentiment.
I see Bitcoin as a store of value and another means of diversification, and for that reason I am more interested in adding it to my long-term portfolio, but I am not really tempted to trade it up and down at the current time.
That’s why I highlighted this latest downward price breakout. If it starts to head strongly lower and takes out one of the key fibonacci levels, it could then become a buy because at that point it would be highly likely to bounce back, and would also be a great entry point for a long-term investment.
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