Bitcoin's Actual Value

Bitcoin allows one to get easily confused.

How does it work? What is it worth? Why all the hype? Curiosity aches to get satisfied, but again, there is always a debate if you read up on the news. El Salvador recently allowing it next to the US dollar as a legal tender created two camps again: Bitcoin fans who see a major breakthrough in a country legalizing the tender, and opponents finding a country like El Salvador not credible enough.

Whom do we trust? You need to ask yourself only one question: “Why would there be so much emotional investment for over ten10 years already into something worth nothing?”

No hype lasts that long. What can stay this long is doubt, if not fear, about something new. Change is certainly something many are afraid of. You can touch gold, build real estate, see land, and it all has history, but that history also includes, in all tangible asset classes, times when it got taxed or seized.

What we are facing now could be a larger cycle which one might intellectually grasp, but who believes that we'll see times of hyperinflation and the dollar rendered worthless? Very few. Hope is a natural tendency of the human spirit to be trusted in at times of adversity.

In our opinion, that is the only reason why Bitcoin is still so cheap. And herein lies the opportunity for each individual to still preserve their wealth and/or create it.

BTC/USD Daily Chart: Worth A Shot/h2

Consequently, to our conviction that Bitcoin cannot be thought away anymore, we took three low-risk entries after Bitcoins’ recent decline into the congestion range. 

We took partial profits on all three trades to eliminate risk and by now have raised the stops to break even entry levels for the remainder of our exposed capital.

After news that Tanzania might join El Salvador in accepting Bitcoin as one of its main payment methods, prices soared to break through the upper triangle resistance line. What was resistance has now become support. The most substantial supply zone to price is near the POC (point of control, i.e., most transaction volume at this price level).

Another sign of strength is that at the last decline, prices only managed to go as far down at US$35,000, a far cry from previous US$33,000 levels, indicating strength.

BTC/USD Weekly Chart: Two Bullish Scenarios:/h2

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Looking at the weekly chart, we can determine that Bitcoin now has cemented a nice double bottom slightly above US$30,000 (yellow line) after a strong down move. We find three high-volume nodes supporting price (green horizontal lines).

Noteworthy as well is that the point of this reversal has happened right at the mean (white directional channel with blue dotted line). Consequently, we anticipate two scenarios (A, B) to be the most likely price behavior of the future. Should more fundamental data flow into the market supporting Bitcoin's recently gained upward momentum, scenario A is expected to be found over the third quarter.

If the bears would be temporarily successful, we anticipate they'll not drive prices lower than US$27,500. We would see price only briefly giving way to the downside to snap back up with vigor.

BTC/USD Monthly Chart: Up, Up, And Up:/h2

What always reveals the fundamental forces at play, and the leading guidance for a trader’s choice of trading tools/systems, are the larger time frames. Examining the monthly chart, we can see the strength and direction in which Bitcoin is most likely to head.

Price turning at the midpoint of the linear regression channel is no accident. We see a high likelihood for this month to end in a green candle and consequently for July as well.

It doesn’t matter where you look; the opinions are always torn into two camps for Bitcoin. Recent attacks of Bitcoin not being green due to its energy consumption provided for much debate again. We are not taking sides.

It again seems more principle-based to view from a larger perspective why people put numbers on value output ranges of energies merely based on an emotional basis. Electric cars and wind energy were fought at their time just as well.

Bitcoin's Actual Value/h2

As investors, we never have a sure bet. We try to stack the odds in our favor, and with sensible money management produced in the trades, we engage in more profits on the winning trades versus the losing trades losses. Bitcoin is no different! Don’t bet the farm and pick low-risk entry points.

We do not think it wise to have extreme opinions in either direction. Or in other words, any form of emotional engagement in the markets typically doesn't produce favorable results. What we are emphatic about, though, is that doubting Bitcoin on a fundamental basis is simply being ignorant of a vehicle with proven facts.

Engaging in this market has its rewards for sure. It might turn out to be one of the better long-term trades in challenging times. Bitcoin's actual value is yet to be determined by a future no one knows, but its credibility is unquestioned.

Written By: Korbinian Koller