Beyond Silk Road: Chart Practice With Bitcoin

Normally, this is the kind of topic that would be reserved for Peoplenomics subscribers, but because it’s a broad interest area, and because speculation is so damn much fun, and since you’re going to share this article with 5 of your closest friends (right? right?) I’m going to have a discussion with you this morning about the outlook matrix for bitcoin.

If you have been following the press reports lately, you’ll know that there have been some real issues for the cryptomoney folks over the past week and this is on top of the US feds moving against some of the bitcoiners who MAY have been involved, ever for peripherally, in the Silk Road case, which – if you live under a tree – was the net’s largest [purported] clearinghouse for online drug deals.

Whether or not the $164-million worth of bitcoins is actually recovered by Peter Ward is something that’s only of passing interest.  As far as I know, he’s not a subscriber.

Seeing as or own drug use us limited to the OTC and Dr. prescribed sort, we naturally wouldn’t know about anything else, unless we were in Colorado or Washington, and in the latter case, we’re properly licensed and might have some additional insights…but I digress.

Bitcoins, when I looked this morning were being quoted on the MtGox boards showed $571 –$575 dollars to the bitcoin. And bitcoiners had every right to be nervous Monday because of problems at Mt. Gox.

imageWhile I’m in the “Who cares?” camp – even now – there is a huge learning opportunity that comes from a review of charts of bitcoin prices.

As you can see (right, click to enlarge), there are at least four ways the market could react going forward from today.

Left to right:  The first possibility is that there will be a larger Elliott wave “three up” arise.  In which case, we wouldn’t be surprised to see bitcoin prices soar to perhaps the $3,000 range.  No, that’s not a prediction, just how that Elliott count works out.

Our second Elliott outcome isn’t so pretty.  Under this one, the peak is in, we have had one wave down, we’ve also finished the “wave 2 bounce” and we’re now headed straight to perdition.  Again, not a forecast, just one of the chart options on the table.

The third choice would be that price action is telling us this is a pendant and when pendants appear, they often roar ahead so that the next move up, starting from the pointy end of the Pendant formation, will be about the same distance up as the “flagpole” part of the move.  Pendants (says my copy of Technical Analysis, 7th Ed.) tend to be “middle move” indicators, which often happen about halfway through a major market rally.

And then, last, but not least, is the “fading into history” which is also a possibility.

If I were a lot younger, I might speculate and buy a few hundred bucks worth on the chance that the Elliott (1) count or the Pendant are in play.

Historically, Bitcoins are a terribly important marker of where we are in the Second Depression.  That’s because they are an almost perfect rhyme off the S&H Green Stamps phenomena that took root and blossomed in the Great Depression:

S&H Green Stamps (also called Green Shield Stamps) were trading stamps popular in the United States from the 1930s until the late 1980s. They were distributed as part of a rewards program operated by the Sperry & Hutchinson company (S&H), founded in 1896 by Thomas Sperry and Shelley Byron Hutchinson. During the 1960s, the rewards catalog printed by the company was the largest publication in the United States and the company issued three times as many stamps as the U.S. Postal Service.[1] Customers would receive stamps at the checkout counter of supermarkets, department stores, and gasoline stations among other retailers, which could be redeemed for products in the catalog. [2]

S&H Green Stamps had several competitors, including Gold Bell Gift Stamps (in the Midwest) Triple S Stamps (offered by Grand Union Supermarkets), Gold Bond Stamps, Blue Chip Stamps, Plaid Stamps (a project of A&P Supermarkets), Top Value Stamps, and Eagle Stamps (a project of several divisions of the May Department Stores Co. of St. Louis, Missouri and offered, notably, by May Company stores, supermarkets, drug stores, gas stations, and dry cleaners in the Cleveland, Ohio area).

So what to do?

Well, we know that Bitcoins “rhyme” (after a fashion) with Green Stamps.  And there are other markers too, that tell us what to expect. 

Remember, the US government HATES competition, which is why trading stamps ended up being regulated (if memory serves) and a little more contemporaneously, we saw what happened when to the patriotic folks were were promoting Liberty Dollars, did we not?

Even more interesting – to the rhyme and worth study by future researchers after I’m long gone: There’s something about schemes and schemers in hard economic times that seems to be drawn to scalping money off whatever the dominant mode of communications is during a particular period of history.

Take Charles Ponzi:  He flourished with his Ponzi scheme by supposedly using sucker money to trade in various forms of postage.  Green Stamps were vogue when the main stream of communications was through the mail.

Update to present and where is the Bitcoin phenomena?  On the “new” Wild West of the internet and  closely allied with electronic mail. 

Also, we notice how there were many outfits involved in the rush to trading stamps in the Depression, and by the same token (a poor pun, I’d admit) we see a multiplicity of cyrptocurrencies popping up including the MaxCoin, WorldCoin, and oh, how the list is expanding.

Something to think about this morning as we await the marketing opening for more conventional investors..but thought you’d appreciate the rhyme and risks analysis as a wake-me-up.  Ain’t much new under the Sun and these modern day electronic “trading stamps” are about as clear an echo of the past repeating itself as a lazy researcher like Ures truly could ask for…


A Market Notes

The US market looks to open up 50, or so, on the Dow when I looked.  We’re still popping a bunch of NoDoz trying to stay awake until some real market news shows up. 

That could happen when Fed boss(ette) Janet Yellen goes up the hill to fetch a pail of money…talking to the fools on the Hill later on.  It’s almost an article of faith that her appearance will be accompanied by a modest rally, since that’s a courtesy usually given Fed bosses.  They can announce the sky is falling and there will be at least a momentary rally.  So polite is the big money crew — sometimes.

There’s one item out of Austria that we’re keeping a pretty close eye on – and more tomorrow in Peoplenomics on this one – it’s the pending collapse of an Austrian bank called Hypo Bank.

The main problem this little bank has is that they are small.  And, as a result, says the Austrian Times, there’s not a big rush of larger, healthier banks, to come in and bail out this smallish unit.

Over the next week or three, don’t mind me if I periodically point to this as possibly being the first of the banks that are going to be allowed to fail – globally – and then comes the question “Just where is that Too Big to Fail line, nowadays?

Damn fine question, that.  Ask me when one of the NYSE listed banks get in trouble.  And while you’re at it, be sure to read up on Herstatt Risk, which is what used to be a possibility when a small bank failed.

In theory, the practice of continuous settlement makes the problem go away…but does that work when the whole world is fraught with risk, like it is today?  Ask me in a few years.

Speaking of Banks….

And with a nod to our favorite c-level regional guy who keeps us in the loop on what goes on domestically, here’s a sampling of items of interest (so to speak) in banking land:

China’s big shadow banking boom is now estimated at $122 billion and is mostly a smart phone based event.  Still, there are some who worry one of the shadow banks could fail and trigger a global crisis. 
They’re always fun to report on…

The first Chinese Bank (International and Commercial Bank of China) is setting up shop in (ready for this?) Peru.

Oh, and UBS has put two employees on leave over hiring of a Chinese banker.

imageOh, and the c-level dude said I might be able to work some mischief with this here chart:

Sure looks to my like coins are going out of style, don’t it?

Of course, we could also hypothesize that money is going out of style.  Or we don’t have any more as a nation, or…

But that may be because no one I know has any lately…

Imperial Presidency

I don’t know about you, but where exactly, again, is it written that Fearless Leader can keep pushing back healthcare deadlines for the (major donor) big corporations?

And again, I tell you, you need to form a corporation in order to get some of the swill at the trough because just being a little sole proprietorship, not using actuarial accounting to shove money and expenses around…why you’re just missing the gravy train.

Or, despite talking a good game, the democorps are screwing small business six ways to Sunday, same at the Bushistas…the Clintonistas….it’s a system of abuse of small business in oh, so many ways.  They are talk a good game, though, gotta give ‘em that.

Google’s Own Airport

Word is that Moffett Field down in Mountain View, CA will have new management, shortly.  A Google subsidiary.

Memo to Google’s Marketing Dept.

Ya’ll know the airport code for Moffett Field is KNUQ, right?  Well that jus’ plain sucks.

I did a quick check of and seems like KGOG is available…might want to put a change in identifier in while the deal is still open. 

Oh, and I’d like a free overnight for the takeover ceremonies when it comes. Our tail number if N7912L and the last name rhymes with idiot.

P.S.  If you ever decide to open a broadcast division, I’d like to be part of it.  I think you could start with KGGL up in Missoula


Shirley Temple.

And roughly 115 people yesterday in auto accidents, as long as we’re in the mourning part of morning.

Paging Brook Benton

Trivia note:  Famous for the 1970 R&B Hit “Rainy Night in Georgia.”

Surely, when the snow hits Atlanta today, someone will do a “Snowy Day in Georgia”?