I am actually very bullish on Bitcoin – long term. However, it became very clear to me after we reached a peak of nearly $20,000 and then corrected back to $6,000 that this wasn’t just a little correction on the way to the moon. Rather, this was a bear market…. And it had to play out. Zooming out and looking at the long term exponential rise reveals that we got way ahead of ourselves, and the price began to decouple from the trend sometime in the spring of 2017. The thing we all have to realize is that even the bottom of the rising exponential line is growing at 10% per month. Think about that for a second. 10%.... per… month! Where else can you get a 10% return per month? So when the price began to separate from that line and grow by 20%, 40%, 60% per month… did anyone think this was actually sustainable? Sounds a lot like when housing in certain areas was going up by 60% per year in 2007 and everyone thought that would continue for the rest of time. When price gets beyond the mean growth rate in any market, it is due to correct. And, when price corrects far below the mean on a valuable asset, the price is due to rise. That’s just the way markets work.
I am expecting one final sell off very soon here. My reasoning is that we simply haven’t gotten close enough to the rising long term trend line yet, the RSI is still overbought, and I believe we are on leg ‘C’ of the Fib retracement and I’m expecting it to end shallower than point ‘A’. Also, this last pop we saw in price was most likely due to traders looking at that inverse head and shoulders and buying the breach of the neck. I don’t think it will hold.
Think about this: If $6,000 was a steal, or $7,000 was a bargain, would the price stay there for very long? I don’t think so. We’d be to $10,000 by now. I believe that there is a lot of money on the sidelines waiting to go into the crypto market, but that money is waiting for the bottom – and we are not there yet. The price hasn’t gone low enough to convince big pockets to go into or back into the market.
This thing could get ugly in the end. Don’t believe me? I remember days where I was watching the price drop by $100 every few minutes. The thing we have to remember is, there are a lot of people who don’t look at charts. They hear from a friend, “You should buy some Bitcoin.” So they get an account, buy at $7,500 and hope for it to go to $50,000. They are busy working, living life, and one day they check their account and see it at $5,000. They become worried, “What do I do? If I sell now I will lose money. I’m sure it will go back up.” So they hold on. And then one day they see the headline “Bitcoin loses 10% in one day, down to $4,000” So they log into their account, and see the price going $3,900, $3,800, $3,700.. and all of a sudden they remember hearing “These are just digital assets They could go to zero.” So they sell because they are afraid of losing all their money. And that my friends is how we could easily end up with a big sell off at the end of this bear market.
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I am expecting one final sell off very soon here. My reasoning is that we simply haven’t gotten close enough to the rising long term trend line yet, the RSI is still overbought, and I believe we are on leg ‘C’ of the Fib retracement and I’m expecting it to end shallower than point ‘A’. Also, this last pop we saw in price was most likely due to traders looking at that inverse head and shoulders and buying the breach of the neck. I don’t think it will hold.
Think about this: If $6,000 was a steal, or $7,000 was a bargain, would the price stay there for very long? I don’t think so. We’d be to $10,000 by now. I believe that there is a lot of money on the sidelines waiting to go into the crypto market, but that money is waiting for the bottom – and we are not there yet. The price hasn’t gone low enough to convince big pockets to go into or back into the market.
This thing could get ugly in the end. Don’t believe me? I remember days where I was watching the price drop by $100 every few minutes. The thing we have to remember is, there are a lot of people who don’t look at charts. They hear from a friend, “You should buy some Bitcoin.” So they get an account, buy at $7,500 and hope for it to go to $50,000. They are busy working, living life, and one day they check their account and see it at $5,000. They become worried, “What do I do? If I sell now I will lose money. I’m sure it will go back up.” So they hold on. And then one day they see the headline “Bitcoin loses 10% in one day, down to $4,000” So they log into their account, and see the price going $3,900, $3,800, $3,700.. and all of a sudden they remember hearing “These are just digital assets They could go to zero.” So they sell because they are afraid of losing all their money. And that my friends is how we could easily end up with a big sell off at the end of this bear market.
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Of course, you have other investors who either aren’t in the market or will be short, and they will be giddy about this time. As soon as they see this kind of price action they will be salivating to log into their account and hit the “Back up the truck, and buy it all” button. And this is how we could see a day where the price drops by anywhere from $500 to $1,000 and then pops right back up again. And from this point forward, once we are a lot closer to the long term support line, we can begin to build a solid base, and return to a bull market once again.The last major correction took over 2 years to get through. We aren’t even 8 months through this one. I don’t think the next bull run will start until next year; however, that doesn’t mean that a great buying opportunity couldn’t present itself sometime during the end of this year. Keep watch for the price to drop near long term support, the RSI to be majorly oversold, and for scary headlines to be on the front page of major publications. When it seems as though crypto might be dead has usually been the best times for buying in the past, not when the price is going up and you feel the FOMO. I don’t think this time will be any different.
The other thing is that if you are a long term bull, you actually want this to happen. There is only so much money that will go into crypto. I don’t know the number, but let’s just say there is $10 trillion that can go into crypto. When the market cap was near a trillion, that limits it to growing by only about 10x. Now that it has dropped to about a quarter of a trillion, imagine if it drops to $150 billion or something like that. That would allow it to grow 67x! .That is encouraging as an investor looking for long term growth.
Looking at the chart I’ve drawn, you will see the Fibonacci sequences drawn and the Fibonacci retracements. I can’t predict where we will bottom, but if I had to guess I would say somewhere between $3,500 and $5,000. And yes, my line is actually a curve. I don’t care. It’s called a Sigmoid growth curve where the growth is reduced the further you go along. Do we really think Bitcoin can rise by 10% per month for infinity? That is what a straight line would imply. So the rate of rise is reduced in time showing that the 10% rise per month on the support line is not sustainable. In time it will be reduced down to a sustainable level.
This is not a recommendation to buy or sell, just my thoughts at this time.
As always, best of luck!
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.