When a commodity or currency have no historical fundamentals for support in trading markets, the volatility of said commodities or currencies can be downright scary. Take the recent trading activity surrounding the world’s most popular crypto-currency, Bitcoin.
Since its introduction in 2009, Bitcoin has shown the ability to sustain explosive growth. It has also come under the kind of scrutiny that leads to periods of massive drops.
As recently as June 12 of this year, Bitcoin had cracked the $3,000 mark in valuation, settling near $3,100. It represented an increase of over 200% from where it sat in the earlier part of the year. Without the necessary fundamentals to support this kind of movement, an investor’s bubble was created.
That bubble popped in recent weeks with Bitcoin retreating as far down as $1,758 this past weekend. What bothered most analyst was the fact this crypto-current broke major support at about $1,860. The farther it falls below support, the more volatility there will be in the market within the next few weeks and months.
Fortunately for some investors, Bitcoin has had a bit of a rebound after reaching an oversold position. It has rallied back into the $2,200 range on strong volume as investors continue to set aside concerns over further weakness.
According to Sheba Jafari, the head of technical strategy at Goldman Sach: Bitcoin is “still in a corrective 4th wave.” That implies that a fifth wave of buying is on the horizon. Based on Jafari’s analysis, “There’s potential (for Bitcoin) to extend as far as 3,915 (if 1.618 times the length of wave I). It just might take time to get there.”
It’s worth noting that the investment world currently has access to trade up to 800 different crypto-currencies. This should be considered highly speculative trading with tremendous upside and an equally dangerous downside.