Wednesday, 31 May 2017

Bitcoin Rush and Parabolic Rise

This post / article is the follow up on my previous post Bitcoin Price Breakout on Japanese Legalization of Bitcoin. So whenever i say "previous post",  "that post", on such thing, i mean the post to this link.

I said in this previous post that i wasn't gonna trade in and out because my investment in Bitcoin is small (but getting bigger rather quickly). But when i saw this chart below, which is not a BTC price chart, but a Google Trends chart, i thought i should get out of Bitcoin, temporarily.

Google Trends showing interest for "investment in Bitcoin"
Google Trends search terms
Spike occurs for the period 14 May to 20 May 2017

Bitcoineer, pirate captain
      Arr...I only take Bitcoins !
I also mentioned in that post that there're 2 historical spikes in Bitcoin price chart. The 1st spike occurred soon after the positive U.S. Congressional Hearing on Dec 2013, and the 2nd spike occurred this month on the Japanese legalization of Bitcoin. But if you look at the interest on "How to invest in Bitcoin" above, the spike in Google Trends search for this month dwarfs the small blip in Dec 2013. This is understandable because Bitcoin is more widely known today than Dec 2013 when Bitcoin was hardly known outside a small circle of Bitcoiners (or is it Bitcoineers? I prefer "Bitcoineers" because it sounds like "Buccaneer". I'm also thinking of the Iceland's Pirate Party, who's an arrdent supporter of Bitcoin. Arr!).

The vertical spike in the above Google Trends chart suggests a sudden surge of interest in the public that draws a large a pool of new money into Bitcoin. As they say "easy come, easy go" or "here today, gone tomorrow". If they come all of the sudden, they also leave all the sudden. A flash in the pan. I'm referring to the trading, not Bitcoin itself; it remains at least for awhile (nobody knows how long). As a long term Bitcoineer (i'll start to use this term from now on. I hope it'll catch on), you shouldn't participate in such a Bitcoin rush. Leave it to the day-traders and newbies. The newbies are, by their very nature, chase market, and pushing prices higher. But if short-term trading is your thing, this parabolic rise was a fantastic opportunity. I said "was" because it's over, for now, until the next big event, and the accompanied parabolic rise.

Bitcoin price chart showing 2 event that sends price to parabolic rise
Bitcoin price chart showing the 2 pivotal events that send the price into parabolic rises

Another thing i mentioned in the previous post is that while Bitcoin is more well known today, its spike in price will still be less than that in Dec 2013, which went up by some 8.5 times.

I also said in the post that there will be a pull back quite soon. But i didn't expect to be so soon. I keep forgetting (more accurately disbelieving) that things can happen at this lightning speed compare to any other market outside crypto markets. I have to get accustomed to the fact that what takes other markets months and years to play out would only take crypto market like Bitcoin days and weeks to play out. Sometimes hours.

If the price of an investment - Bitcoin, gold, shares, etc - only move up or down at a steady pace, the best strategy is just to hold it. Trading in and out of small moves will lead to losses due to brokerages and imperfect entries and exits (nobody is perfect). But if the moves are huge such as those in Bitcoin price in the final 2 weeks of the month of  May, trading in and out make lots more sense.

Bitcoin price chart on Poloniex as of 29 May 2017
Bitcoin price chart on Poloniex as of 29 May 2017
The red bar with a very long wick underneath implies the bottom is in, especially when it crosses an important MA

After seeing the Google search terms spike, i decided to get out of Bitcoin at $2600 (my actual sell order was $2580. I always give some margin of safety). As soon as the sell order is filled, i placed a buy order for $1830. I expect the price would pull back to $1800 (again for margin of safety, i bought it at $1830). Of course, i didn't expect the price to drop as low as $1548 (on Poloniex where i traded anyway). This is very typical of Bitcoin's head spinning volatility. It could overshoot as well as undershoot by a wide margin.

So my profit for this quick trade is $2580 - $1830 = $750. This is certainly a worthwhile effort, considering that i didn't even have to try very hard to get as perfect an entry and exit as possible. In fact, i missed the entry price by a huge margin (the price dived as low as $1548) and yet i still manage to make an impressive gain. If i just put in a little bit more effort, $1000 gain wouldn't be out of the question. So why not trade it when it's so easy? It's just too irresistible not to.

Now that this fast and furious correction is complete (in my view) as it pulls back to its 20 day MA. This is a healthy correction, and the Bitcoin price can now resume its upward path in a more "realistic" (for Bitcoin) pace after pulling back from its unsustainable parabolic rise.

It would be healthy that Bitcoin will trade sideways for a week or two (i can't expect the impatient Bitcoin market to do that for a few months. It's like asking a little kid to stand still for a few hours).

Next time when you see such a spike in Google Trends chart again (and the accompanied parabolic price rise in Bitcoin chart), it's time to get out and get back in after the price correction. You won't have to wait for long. I'm impatient, but Bitcoin market beats me in that respect. Not that i complain. The Google Trends chart could be used alongside with Bitcoin price chart to get the signal of a short term top.

On the other hand, if you haven't owned any Bitcoin, last 2 weeks were the worst time to get into Bitcoin (unless you day-trade it). Now, it's better to buy some after this correction if want to become a long term Bitcoineer. Arr!

Would there be more price volatility in the up coming scaling issue? Will have to wait and see. No market move in a straight line.

Sunday, 28 May 2017

Lucky Saigon: A Trip Down Memory Lane

Lucky Saigon
17 North Canal Road
Singapore 048829

It's been awhile, and I'm homesick for (but never sick of) Vietnamese food. Well, Saigon is 1 of the my 3 homes (arguably 4). The other 2 being Sydney and Singapore). For 1 thing, I like the name of the restaurant, Lucky Saigon. Who doesn't like luck? As for Saigon, that was the name of my 1st home (the capital city of South Vietnam) until they changed it to the mouthful Ho-Chi-Minh City after the Fall (not Autumn, Yanks) of Saigon in 1975, named after the father of Vietnamese communism. Many people fled the city after the name change (some by helicopter on a rooftop. Most by leaky boats).

Have you noticed how many Vietnamese restaurants have "Saigon" in their names? A lot, i tell ya! As for Ho Chi Minh City, i can't recall any Vietnamese restaurant has that name in it (there may be a bust or 2 of him in a few Vietnamese restaurants). The diners, like the Saigonner (or is it Saigonnese?), may immediately flee the restaurant if they rename it to Lucky Ho Chi Minh City. So it's safer to stick with Saigon. I hope they change Ho-Chi-Minh City City back to Saigon. The city of Leningrad (named after Lenin, the father of USSR Communism) has been reverted to its old name St. Petersburg (after St. Peter). Why not Ho-Chi-Minh City? The Vietnamese commies followed the Ruskies in everything else...

They may dance like robot or Egyptian (or robotic Egyptian), but the song is Saigon Is Oh So Beautiful (or Sài Gòn Đẹp Lắm, or Sai Gon Dep Lam if you don't want to bother with funny Portuguese squiggles around Latin alphabets). Nobody writes a song about Ho Chi Minh City (or name a restaurant after it). Get the hint? I know you know, Vietnamese government. Change it back, for God's sake. I know you believe in (Catholic) God, now.

Sorry, i was suddenly struck with Saigon homesickness (it hadn't happened for a long while and thought i was cured of that incurable affliction, but i had a sudden acute relapse just then). Now, i have it under control once again and ready to talk about the food. Food cures all ills, right? Food, the best medicine. Food and laughter, even better.

 The Place 

The restaurant is located on the 2nd floor, which i like. I like to eat food that's elevated to a higher level, and at the same time, look down on people walking by below, hungry like busy ants.

They don't usually have a ladder at the end of their staircase, i imagine (just good food and rainbow. No leprechauns, i promise). They were doing maintenance while we were there. It's rather quiet at lunch time on a Saturday.

Staircase, Lucky Saigon restaurant, Singapore
There're 2 "welcome you".
Perhaps 1 for Yank, and 1 for Brit. Where's 1 for Aussie?
I guess there's just not enough "Welcome you" to go around.

Some people prefer the smell of coffee in the morning (others - like Lt. Col. Bill Kilgore in Apocalypse Now (1979). He should be nicknamed Kill Bill) - likes the smell of napalms, i like the sight of girls in áo dài (= long cloth). Ao dai gives the waitress that c'est ne pourquoi aura that serves me up with an extra kick of nostalgia, and bon appétit. Yum yum.

Dining interior, Lucky Saigon restaurant, Singapore

 The Food 

Bill, Lucky Saigon restaurant, Singapore
La bill.  Prices are quite competitive, especially in the city location.

Pho Bo (Beef Noodle Soup):  8.5 / 10
We wanted to order 2 of our fave Vietnamese soup noodles: Bun Bo Hue and Bun Rieu (which i can cook, but too much work and doesn't seem worthwhile just for the 2 of us). The appearances of these 2 dishes in the menu also signal to me an existence of an authentic Vietnamese chef in the kitchen. But when the waitress suggested to me to give Bun Rieu the flick, perhaps after hearing me ordered in Vietnamese, we opted for Pho Bo.

Menu, Bun Bo Hue and Bun Rieu, Lucky Saigon Restaurant, Singapore
Bun Bo Hue and Bun Rieu, my 2 fave Vietnamese soup noodles

Anyway, Pho Bo should be a standard litmus test of their standard. This is one of the more authentic tasting pho i tried. The beef are decent, not so tough. Decent beef is hard to find in Singapore restaurants. The soup is ideal, and the noodles are just right.

My only complain, there was not enough greens. But this isn't a criticism of this restaurant, but Vietnamese restaurants in Singapore in general. Veggies are too expensive here.

Pho Bo (beef noodle), Lucky Saigon restaurant, Singapore
Pho Bo (beef noodle)

Bun Bo Hue (Hue Spicy Beef Noodle): 8 / 10
Try this if you like a spicy, sweat inducing, tongue scorching noodle soup.

This one isn't as hot as those I have tried before in Sydney, which is surprising as Singaporean love spicy food. A couple of ingredients or toppings are also missing. Probably because you can't get them in Singapore. I've tried, but no luck (clearly, neither can Lucky Saigon's chef).

Bun Bo Hue (Hue Spicy beef noodle), Lucky Saigon restaurant, Singapore
Bun Bo Hue (Hue Spicy beef noodle)

Cafe Sua da Ice (Coffee with Milk):  8.5 / 10
For the Singaporean who's used to drinking coffee with condensed milk, this Vietnamese coffee isn't hard to getting used to. But it isn't just the condensed milk that sets the Vietnamese coffee apart. The 1st time i tried Sydney coffee, i found them rather sour (or acidic), having accustomed to the bitter Vietnamese coffee beans. After many years of drinking coffees in cafe like Starbucks or Coffee Beans and Tea Leaf, now i find the Vietnamese coffee bitter. I've learnt to appreciate both. But i still prefer the Vietnamese blend. I'm probably biased because of my childhood experiences and the incurable nostalgia. The tongue of a child is always more forgiving (and sharper) than an adult one.

Vietnam is the 2nd largest producer of coffee beans (only behind Brazil). The acidic coffee that we've used to in the West are produced in Brazil and other places. The Vietnamese beans give us that delicious bitterness.

Vietnamese coffee, Luck Saigon Restaurant, Singapore

Bo Kho Banh Mi (Beef Stew with Bread Roll): 8 / 10
I like stew of most kind, and this beef stew is no exception. But i like it even more because it's eaten with French stick. There's nothing quite like eating bread that's been dunked into the stew. The meat is little dry (just a little, and quite typical in a stew. I'm just being picky). The stew is quite rich without over the top. And the star anise is just the right amount without being overwhelming that i've came across in some other places.

Beef stew, Lucky Saigon Restaurant, Singapore

Wednesday, 24 May 2017

Thought of the Day 31: Cause and Cure of a Headache

Crown, Romanian king

“A crown is not a cure for a headache.”     - European proverb

It's usually the cause of it, especially if it's heavy.

Wednesday, 17 May 2017

Cyclical Reversal in Gold and Commodity Markets

Fundamentals of gold is one of the most difficult thing to work out. Probably because gold could be viewed simultaneously as a commodity, store of value, inflation hedge, geopolitical fear hedge, etc. The forces that drive its price are multiple. So it's simpler and better to do technical analysis on it.

Gold is many things, but industrial metal ain't one of them. Or is it? Its industrial usage is certainly play a small role. But then, if you look at the price action from the cyclical commodity peak of 2011 up until today (17 May 2017), gold's correlation with commodity is quite strong.

Let's look at 3 charts in particular.

Spot gold chart from 2011 to 2017
Spot gold chart from 2011 to 2017

Metals and Mining ETF chart from 2011 to 2017
Metals and Mining ETF chart from 2011 to 2017

Spot Copper price chart from 2011 to 2017
Spot Copper price chart from 2011 to 2017

The XME (Metals and Mining) ETF capture prices of industrial metal. I've also included Dr. copper because it's the supposedly most important barometer of industrial strength.

The 3 charts all shown important similarities. They all peaked at 2011 and bottomed in the beginning of 2016. Actually gold is slightly ahead, therefore leading, the other 2 charts by a month or so. All 3 prices are kept under the long term resistance lines that extend from 2011 up until today. And the green arrows in all 3 charts all showing that their prices are within the striking distances from the long term downtrend resistance line.

While i haven't included them, many other charts of diversified mining majors - BHP, RIO, FCX - all showing similar price actions. This shouldn't come as a surprise.

After a strong run-up from the 2016 bottom, the commodity complex peaked in Feb 2017, and corrected for some 3 months. Maybe i speak too soon, i think the correction is over and ready for the next leg up. The price actions so far are telling me this, at least for a short term rally.

If i need to cite fundamental reasons, i'll say the falling DXY plays a part. And the OBOR (One Belt One Road, aka Belt and Road) Initiative initiates this commodity rally. If OBOR is going to play out as it's planned, its effect on commodity prices should dwarf Trump's proposed infrastructure spending (if it happens at all). And also, PRC is just better at doing these things than USA as they have done so in the last 3 decades. There's talks that China may underwrite some of the U.S. infrastructure deal, which is win-win for both countries.

The size of the project is mind boggling that this project involves some 65 countries (and intends to expand to 100 countries). When all said and done, it should inject some 4 - 8 trillion dollars into the world economy, much of it flows into commodities.

If the current commodity rally is going last for a few months, all the charts with the long term downtrend resistance lines would likely be broken, taking gold along with it for the ride. I couldn't see how gold would be down or even stalled out while the commodity complex is charging ahead.

Perhaps, the correlation between gold and the commodity complex has more to do with the reflation theme. When commodity prices are rising, this leads to inflation, and an inflation hedge is the most notable and enduring investment theme for gold. Geopolitical risks like Brexit or French Election or Trump's D.C. dramas only provide transient boosts to gold prices as a fear hedge. As soon as those fears subsided, the gold rallies quickly fade away. A flash in the pan. Only inflation fear can sustain gold rally over a long period because inflation can last for years while geopolitical fears last only as long as the events, which typically for days or weeks. So for a sustained bull market in gold or commodity to occur, you need an economic boom that ignites inflation (something central banks have been trying to do for years with some successes).

OBOR and U.S. Republican infrastructure build will take time to play out. Depending how much of these 2 gigantic projects are being implemented, but as far as commodity prices go, we are much closer to the bottom than the top.

Even ignoring the falling DXY and OBOR, the synchronized global growth we are witnessing right now alone should be positive for commodity prices and inflation. So sooner or later, the long term resistance line will be broken. I bet on sooner.

If you're thinking about buying gold because of the scenario i painted above, you're better off buying base metals like copper or even zinc. They're likely to outperform gold.

Monday, 15 May 2017

Thought of the Day 30: Cat with Gloves

cat eating food from a plate

“A cat with gloves catches no mice.”     - English proverb

A cat with gloves is likely to eat supermarket food (and play with mice).

Wednesday, 10 May 2017

Bitcoin Price Breakout on Japanese Government Recognition

The 1st half of this article is a follow-up of my previous post entitled Next Probably Bitcoin Target - Part 2. This 1st half is entirely dealing with technical analysis. But the 2nd half is looking at the fundamental reason for the latest breakout.

 Technically Speaking 

Bitcoin price chart showing breakout from price channel
BTC price for the year so far

I wrote the article on the day (30 April 2017) when prices broke out of the upper trend line as indicated by the chart above. The large bar (or price range) suggests that this is an important pivot point.

I also said that after a break out, the price may retest the upper trend line, which it did (as indicated by the chart above). I didn't buy it back on the day when the price retested the upper trend line because this retest may turn out to be a continuation of a price decline. I did buy it back in the following day when the price went back up, and confirming that this is a successful retest of a breakout.

 Fundamentally Speaking 

The Bitcoin prices have seen some strong spikes from time to time. These spikes are usually accompanied by events that are positive to the development of Bitcoin.

Bitcoin historical price chart showing spikes and events
Historical BTC price chart from late 2013 to present day (May 2017)

This longer term chart above shows the 2 such important events and their accompanied spikes in BTC prices.

The 1st one, which is really the mother of all BTC spikes, occurred in late 2013 after an U.S. Congressional Hearing on Bitcoin. Its positive tone sent BTC prices soared from just over $130 to a giddy height of $1150 -  a high that didn't reach again until a few years later.

The start of the the 2nd spike occurred only few weeks ago when the Japanese government has recognized Bitcoin as an asset and legal tender.

This news is huge (or as Trump would say, YUGE), and interesting. It's interesting because the disastrous Mt Gox was used to be a Japanese based Bitcoin exchange. Clearly, this incidence didn't stop the Japanese government's confidence in cryptocurrency, which has continued to thrive after Mt. Gox fiasco.

Of course, the spike of this news couldn't possibly be as big as the spike - which went up about 8x in prices - that caused by the US Congressional Hearing. There're at least 2 reasons for this.

1. Japanese economy, while it's big, isn't as big as the U.S. (and both of these BTC communities combined are far smaller than the Chinese, which was really the one that was responsible for the spike).
2. The Bitcoin market cap is now about 10x as large as its market cap before the US Congressional Hearing. Volatility is inversely proportional to market cap. So when market cap gets larger, price spikes would get smaller in magnitude and frequency.

So we can't expect that the prices would go up 8.5x from here. Also, look at what happened after that 1st spike, it was on its decline for more than a year.

I expect the run-up in BTC prices would go on for a little while, and then it would correct. But even after the pullback in prices, the BTC's average prices would remain higher going forward (unless the Japanese Diet reverses their BTC law). I'm reasonably happy if BTC price go up 2x by the end of the year.

While i expect the BTC prices to decline in a the near future, i probably wouldn't bother to trade in and out. In fact, if it declines too much and fast in my view, i would likely to buy more of it. More than anything, i'm here to enjoy the ride and admiring the changing views of a completely new 21st century currency.

As each country declares Bitcoin as money legally, it would give this crypto a boost in price. If PRC gives it an acceptance, it would receive the biggest price boost as China has the biggest BTC community, miners and exchanges by volume. As more and more countries do this, there'll come a critical point when other countries simply jump onto the bandwagon. They don't want to be left behind. I'm hoping this process takes time. Because if this legalization of Bitcoin happens too rapidly, BTC prices will reach a speculative bubble; clearly not a desirable situation. I've a feeling that nothing happens slowly in Bitcoin. After all, it's a digital product, and nothing occurs slowly in the digital world.

Sunday, 7 May 2017

Thought of the Day 29: Friendly Age

facebook friends counter

“Count your age by friends, not years.”     - John Lennon

By my friends count, I'm clearly a teenager. I'm virtually over a hundred years old if i count my facebook friends. Oh no, I'm 85 now by fb friends count. Wait, give me 5 minutes...I'm over 100 years old again by fb friends! Woohoo! Eh...I'm getting younger...darn it!

Wednesday, 3 May 2017

Thought of the Day 28: Crooked Timber and Straight Closet

crooked tree trunk

"From the crooked timber of humanity, no straight thing be ever be made."   - Isaiah Berlin

From the straight wooden closet, all manners of humanity can come out.

Monday, 1 May 2017

Next Probable Bitcoin Price Target: Part 2

This is just a follow up on this article published a couple of days ago on Saturday 29 April 2017.

I've sold my holding on Poloniex for $1558.8 today just before i published this article. BTC price has reached the vicinity of my estimated target, which comes a little sooner than i thought. The large one day bar (up in excess of 9% at the day's high) today with record volume suggests a blow off top (not dissimilar to the peak of 4 Jan 2017). Now i wait for it to come down for my next buy. If this break out of the trend line continues for a few more days, i would consider re-enter at price above this upper trend line.

This large volume and price surge signal that the price is at a pivot level; in this case, the upper trend line. These price actions suggest that some traders are betting on a breakout above the trend line.

At this point in time, my view is that this is just a false break out (bear in mind that there's such false break out on 10 March 2017). Will have to wait a few more days to confirm or reject this view, and trade accordingly. There's no need for me to make a call at this time that it will be a real or false break out. I sold my holding once my price target is reached and locked in my profit. If the breakout is indeed confirmed in the near future, i will re-enter. That will be a completely new trade. I have lost little by locking my gain now, and re-enter later.

Indeed, in a real break out, it's entirely probable that after the prices break higher from the upper trend line, it may retest this trend line. That would be the best time to enter. Of course, it may not retest at all. In a rampant bull market like the Bitcoin market, it probably wouldn't. Will see.

BTC prices at Poloniex exchange on the day of my trading
BTC prices at Poloniex on the day of my trading

(There're different prices being traded among different exchanges. There should be arbitrage for the nimble fingers).