Bitcoin broke out above key resistance and I believe it is headed higher over the coming weeks and months

Two days ago I wrote about how Bitcoin was testing key resistance and that I would be a buyer on a breakout above $550. Well, Bitcoin blew through $550 and climbed to $585 today before falling back towards $575. Bitcoin is one of the core holdings in the Technology Speculator portfolio and I added to my position today at $565.

bitcoin chart breakout

I believe the correction in Bitcoin has likely run its course. The price stopped falling and began to consolidate over the past few months, putting in a series of higher lows and as of today, a higher high. While I believe you should always take technical analysis with a grain of salt, especially in a new space such as crypto-currencies, these are very bullish technical moves that point towards higher prices in the near future.

Recent strength in Bitcoin is party driven by an increase in geopolitical tensions around the globe and lost trust in governments and central bank fiat money. As governments impose arbitrary sanctions, freeze bank accounts or debase their currencies, citizens are increasingly turning to alternatives that the government can not control, manipulate or seize.

I believe we could see Bitcoin climb back above $1,000 before the end of 2014, providing investors with the opportunity to nearly double their investment from current levels. In the long run, I believe we could see Bitcoin at $5,000, $10,000 or more, as the supply remains limited and an increasing number of retailers and consumers begin using the digital currency. Once Amazon, Ebay, WalMart or another large retailer begin accepting Bitcoin, the price is likely to go parabolic.

As always, I believe it is wise to edge into new positions via purchasing in tranches. You might want to consider buying one third of the total amount you want on this breakout and buy the remaining amount over the coming weeks. This way you can wait for Bitcoin to confirm the breakout and ensure that you don’t go “all in” at the wrong time.

I hope you are enjoying the Holiday weekend and I wish you health, wealth and happiness!

Jason Hamlin