The Bitcoin Dilemma

03/24/2014 6:00 am EST


Brian Shannon, CMT


Traders Brian Shannon and Rob Booker discuss the bitcoin phenomenon that has spurred a lot of interest from the investing community.

ROB:  I’m here with my friend, Brian Shannon, talking about the rise of the digital encrypted secret currency, Bitcoin. 

BRIAN SHANNON:  Crypto currency.

ROB:  You can’t avoid a conversation about Bitcoin in the market today.  Do you have a take on this whole thing? 

BRIAN SHANNON:  I go back and forth on this one too.  It’s pretty exciting.  The price movement is just insane.  It really is crazy.  The movement is really compelling from a trading standpoint but you have limitations as far as getting short and some of these exchanges are going under.  I think you have to have a very, very high level of speculative tolerance to get involved in these things.  You don’t do it with much money if you’re going to get involved. 

ROB:  You wrote an article about it and what I found interesting about it is not long after I’ve seen my friends talk about it or write articles about it, we’ve watched as there’ve been certain disruptions in the market, a failure of a broker or a high profile prosecution.  How would those kinds of situations play in your regular trading in the equities market?  They would have certainly a negative effect. 

BRIAN SHANNON:  You would try to avoid those in equities, obviously.  I try to avoid the news as much as I can.  You want to be aware of when earnings are due out or when the Fed, someone’s going to speak, or a FDA report.  You can kind of foresee those.  Every once in a while, a true surprise comes along but I think with the Bitcoin world, stuff’s coming from all corners of the globe on this thing that is generally pretty negative news.  The price movement, it’s just really tough to figure out.  I think Alan Greenspan said it’s really hard to wrap your mind around how this is valuable or something to that extent.

ROB:  As a currency trader myself, and I often don’t take an active role in these interviews but it’s interesting to me there’s a finite amount of Bitcoin available.  There’s a highly sophisticated technological backing on Bitcoin.  There’s a community that is like rabidly, fervently dedicated to it.  These are the things that I would look for in a long-term investment really.  Frankly, I am long Bitcoin for the long, long, long-term and I love these temporary disruptions where the market has a shock to the system and drops. 

BRIAN SHANNON:  I have the same philosophy, which I wrote about in that article as you know, that I have a couple squirreled away just in case it does hit this $98,000 price target the Winklevoss twins have on it.  I’m skeptical of that.  I’ll buy it on the way up, sell some, and then when it crashes, I like to pick some up and think okay, well, I like to reduce my risk through trading and maybe hold on to a few for the long-term just in case. 

ROB:  That’s the Bitcoin analysis from Brian Shannon.  Thank you so much.

BRIAN SHANNON:  Thanks, Rob.

ROB:  You’re watching the Money Show Video Network.    

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