BTC - The CBOE Futures Affect on Bitcoin and Where to Now
To be honest nobody knows what will happen once futures trading starts tomorrow night. But one thing we can be assured of it will be front page come Monday and CNBC will be updating every 10 minutes. I can not remember in my lifetime there ever being so much hype around an IPO or any other product being introduced into the market. So the only thing we can be assured of is the hype, and the possibility of market swings. So what can we do. Well quite frankly if your long term nothing, just hold through all the hoopla.
I'm sure the hype will overshadow the number of futures contracts traded, but it will be interesting to see how it unfolds as the CBOE' is expected to offer weekly, monthly and quarterly expiration dates. There are a series of controls but the main thing I do not like about the contract is how the settlement is based on one exchange, Gemini (auction price), which does about 1.5% of the volume of bitcoin transactions. Seriously this is the best they could do? Talk about the London gold exchange being rigged! 1 bitcoin = 1 contract $10 price increments.
I'm sure most traders will take this cautiously, like dipping your toe in the pool to see if it's ok to dive into. But regardless once the contracts start trading we will likely see some price action in the markets. Keep in mind this is a fundamental change in the crypto space in general. Who knows what happens, and it's not a pool we are diving into, it's murky waters for sure. Just read all the disclaimers on the CBOE. But to the charts.
The current run has formed a similar pattern which has led to a higher levels as labeled on the lower chart. So I believe we are setting up for another leg up which could go as high as $29,000. I know sounds crazy but it appears to be following the Fibonacci numbers and peaking at these numbers or very close to them. One analyst I follow had all the fibb numbers laid out up to 17,711 and was looking at this as an important level. I noticed that 10,946 was also a fibb number. I threw these on the chart and noticed that the two current runs topped at or near these levels (depending on the exchange). So what is the next Fibb number? $28,657. There is my target.
In addition the current spread between Bittrex and Coinbase is $1500. Now my theory is this. Large private hedge funds and investors can now either safely buy bitcoin (investment) as they can hedge with futures contracts, or they are buying bitcoin as insurance if they are selling contracts. Either way it's clearly higher on the U.S. exchange and I have yet to hear of another theory other than pent up U.S. demand. This tips the favor in being bullish here either way. In addition it's supply and demand. There is a limited supply of bitcoin and as new buyers enter the market we are likely to see one last leg up, before a broader selloff.
But there is still the possibility of a broader pullback here which I have provided an alternate count on the lower chart. This Wave pattern is similar so you can not dismiss it but I favor the upper bullish chart scenario. Not just because I'm long bitcoin, but because of the "V" formation and we appear to be consolidating almost identical to the last setup and the overall trend is up. But it is getting risky to buy at these levels and a pullback to $10-11k is possible.
Bottom line is I personally am adding a small longer term swing trade and this is risky. Now whether I'm right or wrong is insignificant, this is a risk reward I am willing to take based on my overall portfolio performance. I have not mention trades as much as I get a number of, should I sell, hold, what should I do, comments and each Investor/Trader is in a different situation. So assess and risk accordingly. YOUR MONEY YOUR TRADE! Bottom line, get the coffee and peanuts out, tomorrow night is going to get very interesting!
I'm sure the hype will overshadow the number of futures contracts traded, but it will be interesting to see how it unfolds as the CBOE' is expected to offer weekly, monthly and quarterly expiration dates. There are a series of controls but the main thing I do not like about the contract is how the settlement is based on one exchange, Gemini (auction price), which does about 1.5% of the volume of bitcoin transactions. Seriously this is the best they could do? Talk about the London gold exchange being rigged! 1 bitcoin = 1 contract $10 price increments.
I'm sure most traders will take this cautiously, like dipping your toe in the pool to see if it's ok to dive into. But regardless once the contracts start trading we will likely see some price action in the markets. Keep in mind this is a fundamental change in the crypto space in general. Who knows what happens, and it's not a pool we are diving into, it's murky waters for sure. Just read all the disclaimers on the CBOE. But to the charts.
The current run has formed a similar pattern which has led to a higher levels as labeled on the lower chart. So I believe we are setting up for another leg up which could go as high as $29,000. I know sounds crazy but it appears to be following the Fibonacci numbers and peaking at these numbers or very close to them. One analyst I follow had all the fibb numbers laid out up to 17,711 and was looking at this as an important level. I noticed that 10,946 was also a fibb number. I threw these on the chart and noticed that the two current runs topped at or near these levels (depending on the exchange). So what is the next Fibb number? $28,657. There is my target.
In addition the current spread between Bittrex and Coinbase is $1500. Now my theory is this. Large private hedge funds and investors can now either safely buy bitcoin (investment) as they can hedge with futures contracts, or they are buying bitcoin as insurance if they are selling contracts. Either way it's clearly higher on the U.S. exchange and I have yet to hear of another theory other than pent up U.S. demand. This tips the favor in being bullish here either way. In addition it's supply and demand. There is a limited supply of bitcoin and as new buyers enter the market we are likely to see one last leg up, before a broader selloff.
But there is still the possibility of a broader pullback here which I have provided an alternate count on the lower chart. This Wave pattern is similar so you can not dismiss it but I favor the upper bullish chart scenario. Not just because I'm long bitcoin, but because of the "V" formation and we appear to be consolidating almost identical to the last setup and the overall trend is up. But it is getting risky to buy at these levels and a pullback to $10-11k is possible.
Bottom line is I personally am adding a small longer term swing trade and this is risky. Now whether I'm right or wrong is insignificant, this is a risk reward I am willing to take based on my overall portfolio performance. I have not mention trades as much as I get a number of, should I sell, hold, what should I do, comments and each Investor/Trader is in a different situation. So assess and risk accordingly. YOUR MONEY YOUR TRADE! Bottom line, get the coffee and peanuts out, tomorrow night is going to get very interesting!
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