Growth Could Be Slowing Down For Cryptocurrencies
Updated
Impatient traders and investors won't like this one. In this analysis, I've updated my market cycle boxes based on recent price action. As you can clearly see, Bitcoin has broken down from the bullish channel (orange) I've been talking about for most of this year. That bullish channel, if held, would have indicated a period of accelerated growth for cryptocurrencies. Particularly if Bitcoin broke that channel resistance to the upside, we could have seen a second bubble, a bit like what happened in 2013. Instead, Bitcoin failed to hold the channel, which could mean that it cannot sustain a rally towards the all-time-high just yet. In the TOTAL2 market cap (left), you can see that altcoins could be about to break down from the uptrend they've held since 2015. It's possible that they've already broken out of it (which may explain the recent selloff). It's possible to draw the trendline (pink) so that we're still holding it, but based on market behavior I have some doubts as to whether it will hold.
Now, you may ask...even with these trends being lost, can the cryptocurrency market still experience long term growth? Of course it can. It would be far more ridiculous if cryptos continued to perfectly hold that trend, as it represents an absurd amount of growth. I wouldn't complain if we saw another mania like we saw in 2017, but I'm trying to provide a much more reasonable expectation here. Even so, I'm still making the assumption that cryptocurrencies will continue to grow in the foreseeable future. I may be wrong of course.
Not only am I starting to expect slower growth in this current cycle, but the market phases (numbered boxes) seem likely to be much longer than they were last cycle. Since Bitcoin retraced so heavily from its first impulse, it's now seeming more plausible that we are in Phase 2. This may also mean that we have even more sideways movement to endure. Perhaps Bitcoin needs to test the 6K zone after all. This would make sense, since the 100w MA is currently between 6700 and 6800. I wouldn't rule out a wick towards 6200 either. If Bitcoin is to continue long term price appreciation, I don't want to see it dip below 6K for long, or even stay in the 6K range for long either. If Bitcoin fails there, we may be looking at an even gloomier picture for the crypto market, as it would mean that we were never in a bull market to begin with. For now, I'll remain patiently bullish here.
I added a new feature to these charts as well. You can see that there's a green curve. This represents the deceleration of growth over time. It has already happened with Bitcoin (just look at the BLX chart), so I think it's possible it will happen with altcoins as well. Just maybe...alts have one more cycle of insane gains before growth slows down, but I'm starting to think this is unlikely.
Right now, the market is split into two camps: Those that are impatient for a bull market to start and those that think cryptocurrencies are at least heading to new lows, if not dying out altogether. The reason I think it's very possible we simply enter a slow growth stage is because neither of these parties is probably right. The market movement is a result of an agreement between buyers and sellers. For periods, sellers can be in control. Same with buyers. That's what creates bull and bear cycles. At this moment, I don't think either side is strong enough to make a convincing move, but the long term trend is still up. As such, I think it is unlikely that cryptocurrencies begin a face-melting bull run soon, and equally unlikely that the market heads to new lows. With this in mind, I think it's possible that the low is set. The weekly RSI still looks fairly bullish, particularly for alts (check out the fractal from 2015 - circled). We could have one more leg down, but my expectation (as outlined in this chart) is that the market gets fairly close to all-time high levels by next summer at the earliest. Don't get me wrong, this is still an insane amount of growth in a short amount of time. But I feel like many people think it needs to happen sooner. The impatience and bitterness from this community is quite palpable.
Based on this "roadmap," you can see that Bitcoin may not actually even break its all-time high until 2022. Even if it does, I'm capping the target at around 100K or just below, for now. We don't know how Bitcoin would handle prices that high, so I think it's important to be conservative. At higher prices, Bitcoin's flaws become more apparent, so I I still expect alts to outperform in this coming cycle. It's hard to say where they could end up, but I do still think they can be worth trillions of dollars. That is....unless the market is about to collapse...hmmm.
This all goes to show you how important it is to keep up to date with what's going on. I'll remind you, even though I've changed my outlook a few times, I've nailed pretty much every major move for this market since last November. I've gotten pretty good at timing market extremes. My next written post will be a "year in review" of sorts, where I'll talk a bit about my experience analyzing this market, what I've learned, and where I've succeeded, despite numerous failures. Today, I just wanted to get this out there, because it's a significant change from what I've been hoping for this year. It's likely I won't be posting nearly as often in the coming months (unless something really changes). I might have to focus more on stocks, particularly since warning signs are still loud and clear on that front. I've already slowed down my post rate from when I started. I think it's better to focus on quality rather than quantity anyway.
Well, that's it from me. Thanks to everyone who reads my posts. It means a lot that some of you find my analysis helpful. I must of course caution that this is not financial advice. I write about the market mostly for my own sake. Posts like these help me rationalize my fear and greed. This is meant for entertainment and education only. Trade at your own peril.
-Victor Cobra
Now, you may ask...even with these trends being lost, can the cryptocurrency market still experience long term growth? Of course it can. It would be far more ridiculous if cryptos continued to perfectly hold that trend, as it represents an absurd amount of growth. I wouldn't complain if we saw another mania like we saw in 2017, but I'm trying to provide a much more reasonable expectation here. Even so, I'm still making the assumption that cryptocurrencies will continue to grow in the foreseeable future. I may be wrong of course.
Not only am I starting to expect slower growth in this current cycle, but the market phases (numbered boxes) seem likely to be much longer than they were last cycle. Since Bitcoin retraced so heavily from its first impulse, it's now seeming more plausible that we are in Phase 2. This may also mean that we have even more sideways movement to endure. Perhaps Bitcoin needs to test the 6K zone after all. This would make sense, since the 100w MA is currently between 6700 and 6800. I wouldn't rule out a wick towards 6200 either. If Bitcoin is to continue long term price appreciation, I don't want to see it dip below 6K for long, or even stay in the 6K range for long either. If Bitcoin fails there, we may be looking at an even gloomier picture for the crypto market, as it would mean that we were never in a bull market to begin with. For now, I'll remain patiently bullish here.
I added a new feature to these charts as well. You can see that there's a green curve. This represents the deceleration of growth over time. It has already happened with Bitcoin (just look at the BLX chart), so I think it's possible it will happen with altcoins as well. Just maybe...alts have one more cycle of insane gains before growth slows down, but I'm starting to think this is unlikely.
Right now, the market is split into two camps: Those that are impatient for a bull market to start and those that think cryptocurrencies are at least heading to new lows, if not dying out altogether. The reason I think it's very possible we simply enter a slow growth stage is because neither of these parties is probably right. The market movement is a result of an agreement between buyers and sellers. For periods, sellers can be in control. Same with buyers. That's what creates bull and bear cycles. At this moment, I don't think either side is strong enough to make a convincing move, but the long term trend is still up. As such, I think it is unlikely that cryptocurrencies begin a face-melting bull run soon, and equally unlikely that the market heads to new lows. With this in mind, I think it's possible that the low is set. The weekly RSI still looks fairly bullish, particularly for alts (check out the fractal from 2015 - circled). We could have one more leg down, but my expectation (as outlined in this chart) is that the market gets fairly close to all-time high levels by next summer at the earliest. Don't get me wrong, this is still an insane amount of growth in a short amount of time. But I feel like many people think it needs to happen sooner. The impatience and bitterness from this community is quite palpable.
Based on this "roadmap," you can see that Bitcoin may not actually even break its all-time high until 2022. Even if it does, I'm capping the target at around 100K or just below, for now. We don't know how Bitcoin would handle prices that high, so I think it's important to be conservative. At higher prices, Bitcoin's flaws become more apparent, so I I still expect alts to outperform in this coming cycle. It's hard to say where they could end up, but I do still think they can be worth trillions of dollars. That is....unless the market is about to collapse...hmmm.
This all goes to show you how important it is to keep up to date with what's going on. I'll remind you, even though I've changed my outlook a few times, I've nailed pretty much every major move for this market since last November. I've gotten pretty good at timing market extremes. My next written post will be a "year in review" of sorts, where I'll talk a bit about my experience analyzing this market, what I've learned, and where I've succeeded, despite numerous failures. Today, I just wanted to get this out there, because it's a significant change from what I've been hoping for this year. It's likely I won't be posting nearly as often in the coming months (unless something really changes). I might have to focus more on stocks, particularly since warning signs are still loud and clear on that front. I've already slowed down my post rate from when I started. I think it's better to focus on quality rather than quantity anyway.
Well, that's it from me. Thanks to everyone who reads my posts. It means a lot that some of you find my analysis helpful. I must of course caution that this is not financial advice. I write about the market mostly for my own sake. Posts like these help me rationalize my fear and greed. This is meant for entertainment and education only. Trade at your own peril.
-Victor Cobra
Note
Please ignore the extra "7" on the total2 chart ; )Note
Correction: It appears that Bitcoin's 50w MA is around $6764 right now on Bitfinex. The 100w MA has already been tested over the last two weeks and held as support (so far).Note
I updated my altcoin chart/projection so that the green curve fits better. My assumption in this analysis was that there could be one more drop, but if this is the end of this down move, we could see something more like this playing out (if the crypto market is going to grow in the coming years) Note
it would be pretty amazing if this trendline continued to hold. Either way, I think it's possible we make an attempt at the downtrend channel resistance (orange), currently around 75-76B Note
As mentioned in this analysis, there is a way of drawing the trendline where we've broken down from it already. Time will tell if we will have an extended bull market for cryptocurrencies, and it'll also tell us how extreme the growth would be.Note
Another problem I see here is that this could also just be a bear flag, waiting to break down multi-year support.Note
Starting to look much better, but we should still be wary, because we are in a downtrend channel with lots of resistance overhead, particularly in the 75B area. Nice to see these moves today though. Bitcoin dominance is trying to break down as well. Note
Alts are now below their long term trendline. Note
Bitcoin has dropped to the next horizontal support level as noted previously on my Bitcoin chart: Note
Slow growth seems to be indeed playing out. But we have yet to see the "Growth" part of this idea. I'll be curious to see where the market finally finds support (and if it does at all)
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