Today, Bitcoin is down under 19,000 – around $18,400 at press time. While it has repeatedly tested higher resistance, Bitcoin seems unlikely to continue its wild rally into the $20,000 arena.
Bitcoin is still near all-time highs, though, and although it’s made longer-term holders giddy about profit-taking prospects, some analysts warn that corrective action may be in the cards.
A story by Bradley Keoun, Omkar Godbole and Sebastian Sinclair at Coindesk shows how further downside may develop.
“Technical charts have turned bearish with the cryptocurrency’s drop below $18,500,” the three write. “There is evidence of investors scrambling for hedges to protect against further downside. The one-week put-call skew, which measures the value of short-dated puts relative to calls, has risen from -0.20% to 15% in the past 24 hours, according to data source Skew. It means that short-dated puts – a type of options bet that prices might decline – are now drawing higher demand than calls, which are bets that prices will increase.”
However, the authors also make an interesting case for a much bigger future market for cryptocurrencies based on a case study involving Wells Fargo, a traditional bank with trillions of dollars in management.
Keoun, Godbole and Sinclair report that Wells Fargo has “no official recommendation” on cryptocurrency, with top brass citing vague regulation. However, officials confirmed that Wells Fargo also does not help its members to acquire or maintain cryptocurrency holdings.
As the authors point out, that alone is incentive for Wells Fargo not to dabble in cryptocurrency recommendations at all.
Wells Fargo’s people also left out one of the most compelling reasons for investors to steer clear of cryptocurrency – it’s the news that the IRS may plan to audit all filings with cryptocurrency assets, and that the federal agency has farmed out these audits to a third-party contractor.
Although some traditional investors may be enticed by having banking brokers who can get them into crypto assets, it’s likely that many of them will refuse to get involved until they’re assured that it won’t put an IRS target on their backs.
Keep an eye on these development for BTC action plays.