You know a frenzy when you see it.
The latest fad is the ‘back-from-the-dead’ Bitcoin. Since my highlights earlier this year (here and here – right before the rally), prices have gone through the roof. At $12,800 per coin, its percentage gains is in excess of 200%(!) in just over three months.
One reason for BTC’s latest spike is due to Facebook’s new virtual coin initiative, dubbed ‘Libra’. This project is supported by multiple sponsors (link). Speculators anticipate that this project could propel Bitcoin into the mainstream payment system, thus making Bitcoin more valuable.
But, it is this too late to chase Bitcoin? In some ways, yes. Prices are accelerating upwards in a vacuum of supply. This rapid gain is unlikely to last very long because it is pulling future demand forward. At this rate of gain, price volatility is likely to spike at any time. Prices could jump then correct sharply.
What’s happening now is that Bitcoin’s advance is pulling all other speculative coins upwards. For example, Ethereum, the second largest coin by market cap, is basing nicely and accelerating towards the $400 level (see below).
Overall, if long be prepared to cut some position in anticipation of a spike in volatility.
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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.