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bitcoin consolidation

Solid BitCoin Consolidation Finally Bears A BitCoin Breakout

by Trace Mayer on December 19, 2011 · 16 comments

Reading time: 6 – 9 minutes

Few assets are as volatile as BitCoins have been. Over the past 365 days they have ranged from about $0.05 to over $30. After a solid consolidation BitCoins have now broken out and the next upleg appears to have appeared with a 35% rise in the past 10 days.

BitCoin makes this payment efficiency possible because it is based on cryptographic protocol where its security is grounded in the laws of mathematics not laws of men which may or may not be enforced profitably.

THE BITCOIN RANGE

Back in June 2011 I wrote about how I supposedly missed the trade of the year where I could have “with a completely non-levered investment that would have turned [$5,000] into slightly over $550,000 in 8 months. $550,000 in a completely anonymous account with neither a paper or audit trail nor a 1099 and the asset would have been purchased with $5,000 of physical cash.”

Some say hindsight is 20/20, but I do not think so, because it still takes the gathering, analyzing and understanding of the data before one can get a picture and sense of what has happened. Before there were no data points to use in predicting the sustainability of the unsustainable BitCoin upleg. But this time around we can make slightly more grounded prognostications.

Filtering out the daily noise of the markets is essential if one is going to hone in on the signal. One of my favorite tools to accomplish this is the simple 200 day moving average. Taking into account almost seven months of data it is long enough to filter out daily noise, like the MF-Global or MyBitCoin fiascoes, but still close enough to capture the general trend of long-term secular markets, whether bullish or bearish. To derive a relative price I take the current price divided by the 200 day moving average.

In BitCoins case we now have a tremendous upleg and crash in the history books. An analysis of the data reveals the low end of the relative price is around 0.35x (cheap) while the high end was about 12x (expensive).

To create the organized cryptographic hash required energy which had value in the market.

BITCOINS PROVIDE UTILITY AND ARE VALUED

BitCoins are a decentralized peer to peer digital currency. They are the most efficient and safest form of currency I am aware of. Sure, they have neither the intrinsic value nor depth of volume like gold but they are still harmonious with the regression theorem. To create the organized cryptographic hash required energy which had value in the market just like gold had value in the market for jewelery before it acquired additional value from its utility from moneyness and currency applications.

For example, I was reading a blog which recommended the application Total Finder. Total Finder allows one to open multiple tabs in the Mac Finder which makes dragging, dropping or locating folders and files much easier. It is a feature that should be built into the OS but is not so a creative entrepreneur saw a market need and filled it.

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