Bitcoin Rallies 5 Percent, $290 Hit

                              

                                   

After stalling the BTC rally for three days, the weak resistance at $276 finally gave way today. The break opened the floodgates and in the next 12 hours bitcoin gained a sizable $15 dollars (5.5 percent). Today’s high stands at $290 ($289.89 to be exact) and prices are currently quoted close to this mark at $285.70 on BTC-E. This compares to $287 flat on BitStamp and $291.60 on OKCoin.

We are now just $15 dollars away from the important $300 round number. This was the stopping point for bitcoin’s January rally and it will likely be the next battleground in the battle between the bulls and the bears. If the figure is broken, notable resistance levels above it are $334 and $350. On the downside, a move below $240 should end the current rally. But to generate a new downtrend, BTC/USD will need to move below $225 per coin.

Dan Morehead, the CEO of Pantera Capital, posted an article in Forbes. Morehead overlays the US stock indexes  the S&P 500 and NASDAQ to the current price of bitcoin. Unsurprisingly, he finds that price formed similar patterns in the boom/bust cycle in the NASDAQ 1996-2015, the S&P 2006-2015 and Bitcoin 2013-2014. The rest of his article goes over the fundamental side of things, covering increasing metrics like merchant/user adoption. Morehead tries to make the case that you should ”buy low” and that due to increasing BTC metrics, fundamentals today are looking better then ever.

While the article is an interesting read, there are several problems with it. First, the scale of the charts is drastically off, with both the time and the percentage scales off. The NASDAQ chart covers a period of 19 years, the S&P chart covers a period of 9 years while the bitcoin chart only covers the last two years of price action. Second, the percentage decline in bitcoin has been much bigger, with losses of over 80 percent and more if we look back at history. Third and most important, buying low is a great way to end up holding the bag when the rally eventually stops.

Buying ”low” is very subjective, you can never know where the market will bottom out ahead of time. During 2014 I’ve read hundreds of posts and articles claiming that this is THE bottom for bitcoin. It happened at $800, $500, $300, well you get the picture. Following the trend, whatever that may be, up or down, is much simpler.

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