Is the bottom in for Bitcoin?

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The old adage in investment markets is when everyone is bearish, you should be bullish. Can that be said of cryptocurrencies?

Recently, the Bank for International Settlements – the central bank’s central bank – came out with a damning report into the market for “alternative” currencies, pointing to the major flaws of scaleability and trustworthiness within. Every major investment bank head has come out slamming Bitcoin in recent days, in particular the head of Vampire Squid, Lloyd Blankfein.

The establishment has spoken. Away with thee.

And so far, the market has spoken, at least for Bitcoin, which has dropped from a high near $20,000 to just below $6600, in a classic breakdown of a bubble:

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It’s an ominous weekly chart, with an equally bearish daily chart with momentum in the doldrums and price well below an established downtrend. The only bullish proposition is that of overshooting support around $6500 as it did in early April, setting up a near 50% relief rally:

But trading volume and the lack of volatility on top of overdone negative sentiment maybe pointing to a repeat of that April rally. Volatility is at a year low, which is almost always a sign of increased volatility ahead:

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Volumes have stabilised in the last couple of weeks and now starting to pick up:

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This may seem like clutching at straws, and to my mind, price should the primary indicator of success when coming to picking speculative bottoms.

The problems swamping Bitcoin not only include that of central banks wanting no part of it, but coming up with new entrants into the scheme. And for now, it’s just that – a scheme – not an alternative currency.

It should be treated as a speculative endeavour, on par with trading gold futures and CFDs. Cracking $7000 on the upside would be a good signal to go long, but does not equate to a bottom. Zero is a bottom.

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