The Herd Feels Safest at the WRONG TIME
Many right now are wondering WTF Happened!!!! This was the beginning of the big run, Michael Saylor, Elon Musk, Novagratz, Square, even Jim Cramer touting cryptos as BULL BULL BULL and many jumped into BULL S#!%.
Even though I threw in Jim Cramer's name, he actually sold some Bitcoin and bought a house with it, so really he did what many failed to do. He took his profits and bought a tangible asset, real estate. So he owns some Bitcoin and a free house. This is why Jim is a success, and many others are failures. He understands when there is toooooo Muuuuucchhh FOMO take some risk off the table.
I mentioned a few articles ago that I trimmed even more Bitcoin than we did in our model portfolio, because it simply was to big a weighting in my portfolio. Took a little flak from many that were essentially saying "its different this time, going through wide scale adoption", but was it? Regardless, I stuck to my plan and strategy that was started in June of 2018.
The goal was to remove our initial capital and keep the remaining coins we had for free. Some stuck with it, others, they wanted instant gratification, thought it was taking too long, quit and focused on other strategies. Now maybe some did better, but it does not matter to me because goal accomplished!
See we set a goal, implement a reasonable plan and strategy to attain that goal, executed and ignore all the FURUS around us. It took 3 years, but that was always our time frame. Could we have done better? Sure we could have, but hindsight is simply that hindsight.
With that said, the herd may be getting a little shaken up here.
Technical:
The 30-40k area is a broad support level, some of our followers had low ball orders around 30k to catch a oversold dip. Many were filled and when it bounced back into the 40's we were mentioning lock something in on this bounce. But why? Get to that in a few, but lets finish up the weekly chart first.
I am expecting 30k to hold as support, but we have pretty much sold off the entire week and are closing in on the low. Not good. IF 30k does not hold, 20k is next support and it is now in play. (Brief dips into the upper 20's may happen but as long as it pushes back into the 30k, that constitutes a hold so I want to be as clear as possible for the trolls)
We should NOT push lower than 20k, this would lean heavily that we are entering a more broad correction that could lead to another crypto winter. Not sure sentiment is there yet, still many buying the dip, lots of liquidity in the market, so I am not convinced this is that phase of the cycle. Still looking for another leg higher, but when?
From an EW standpoint, appears we are in a mid cycle wave 4 part of a broader wave 3. Nothing is for certain, but there have been many that sat on the sidelines waiting for an opportunity to get in. Have several friends asking about Bitcoin now, they want to add some, but were not sure if this is the time.
Wave 4 corrections can last months and months and months, look no further than gold which went through a 6 month plus 4th wave correction. So time to add?
Well we are getting to where it is interesting and many that were looking to get in, but hesitated may start adding here slowly. As new participants come in, others buy back inventory sold at higher levels, and as long as the herd is still buying the dip, we will eventually find a bottom. This will be the beginning of the next accumulation mode that pushes us higher. But still too early to be aggressive and here is why.
Short term:
Price action is a prelude to market sentiment. Note the prior outside candle where the next candle continued higher. That was missing in the last pullback, and then it started taking out lows. Hence my little read articles last weekend prior to this pullback about the moment of truth.
Though the dip to 30k was short lived, the bounce was not that impressive, barely getting back to the 38.2% retrace of the prevailing bearish swing. The market also failed to take back 42k which was prior support now resistance.
A close below 34k implies the market is not finding enough buy side strength and lower levels are on the horizon, but how low? There are still some out there that want to get in, but have not pulled the trigger. Not just friends, but potentially some larger institutions, potentially some companies adding to balance sheets, and also some gov't entities.
Smart money accumulates into the lows, and this is what we need to see, signs of accumulation and the market discovery of price. Remember new technologies take time to discover price, so how can we measure what might be the faire market value of Bitcoin?
Trend lines are the simplest technical indicator and IMO one of if not the most useful indicator there is. Looking back at the broader trend fair market value is around 20k right now based on the trend. If I didn't have any Bitcoin, we start pushing into the 20's I would probably start dipping my toes in the water.
Like everything else in life, adoption of new technologies is a trend. We saw the tech market back in the 90's get ahead of itself, pullback was harsh, for those of us old enough to remember, but these new technologies did not disappear, sure some of the crap companies did, but the Amazon's, Google's and Facebook companies of the world prevailed.
Now it could take weeks or months for the crypto market to stabilize and find a bottom, so patience is still key. Looking to add back some inventory sold at higher levels, reasonable to start with some small bites here. Similar strategy I have with Gold, I will buy back inventory sold at higher levels when I have an opportunity at lower ones.
I am less concerned with technicals and simply take the long term approach. It is luck to buy the bottom, that low may never come, so if I sold some say 1 BTC at 54k, no reason not to add some of that back here. I get my inventory back and also 20k, essentially making it a free coin assuming you have no buys above 20k.
This strategy may require you to sit through another crypto winter, but if you are long term, what does it matter.
Sure there may be some better deals on the horizon, but with some experience behind me, I also have seen markets get away and I ended up kicking myself in the ass, for not buying it back when I could. I am always focused on the 3-5-10 year time frame, not get rich quick. Most can't focus that long, want instant gratification, no different than a herd of gazelles.
See gazelles are focused on eating now, ohhh there is a green pasture, lets run over there and fatten up. However the lion lurks and waits for opportunity. They see the green grass, they know the herd is going to come to pasture so they pick a spot and wait.
They wait for the herd to feel comfortable eating to their hearts contempt, and the more they eat, the more contempt they feel, and that is when the lion takes advantage. See the herd feels the safest at the WRONG TIME!
Yes three weeks ago everyone felt safe buying the dip, after all it worked twice before, but as we warn, sometimes the dip can keep on dipping. The same can happen here, though I believe there is a low to be found in the mid to upper 20's.
Remember this has been nearly a 4 month consolidation at the highs, and when it breaks the range, it is generally decisive and quick. Though warning flags were everywhere, few took the opportunity to unload at higher prices, especially in the ridiculous crap coin market.
Now again if you are 20-30 something, and you are focused on 10-20 year time horizon, nothing wrong with HODLING and adding more on these broader dips. I am always in favor of DCA over a lifetime, it is a very difficult strategy to beat trading. But is this the time to go all in?
Throughout the week had many telling me, "dude I'm buying the dip, but DOGE, EOS, ADA, XRP" yada yada yada, the irony is few sold at higher levels. They are cost averaging up, when the market still very vulnerable and this leads to bag holding, and you don't want bags of crap.
If you bought DOGE at 5 cents and rode it to 75 cents, did not sell any, and are now loading up at 30, you can see how quickly this can lead to being upside down, and blowing out your position at the wrong time.
When everyone turns bear, when we get all the FURU's flipping to 8-10k Bitcoin and my friends that bought the dip, cost averaged up, are then blowing out their positions, that is when I want to be all in.
In closing many felt comfortable over the past couple months, too comfortable, everyone was making money, everyone was getting in, so safety in numbers right? Well the Herd Feels Safest at the WRONG TIME, yet few are able to break the emotional barrier and take advantage of it.
However for those of us that did, these pullbacks are as exciting as most were when BTC hit 62k. Why? Because we actually have money sitting in wait to take advantage of the herd. Many of our members are excited about the pullback, not wondering what they should be doing, but looking to take advantage of the frenzy!
It did not happen overnight, we preach patience, patience, patience and when you think you have been patient enough, wait a little more. You had to stick to the plan and strategy for 3 years and at times it was dull, but in the long run it worked.
The best opportunities come when we least expect it, but it is only an opportunity if you can take advantage of it!
Even though I threw in Jim Cramer's name, he actually sold some Bitcoin and bought a house with it, so really he did what many failed to do. He took his profits and bought a tangible asset, real estate. So he owns some Bitcoin and a free house. This is why Jim is a success, and many others are failures. He understands when there is toooooo Muuuuucchhh FOMO take some risk off the table.
I mentioned a few articles ago that I trimmed even more Bitcoin than we did in our model portfolio, because it simply was to big a weighting in my portfolio. Took a little flak from many that were essentially saying "its different this time, going through wide scale adoption", but was it? Regardless, I stuck to my plan and strategy that was started in June of 2018.
The goal was to remove our initial capital and keep the remaining coins we had for free. Some stuck with it, others, they wanted instant gratification, thought it was taking too long, quit and focused on other strategies. Now maybe some did better, but it does not matter to me because goal accomplished!
See we set a goal, implement a reasonable plan and strategy to attain that goal, executed and ignore all the FURUS around us. It took 3 years, but that was always our time frame. Could we have done better? Sure we could have, but hindsight is simply that hindsight.
With that said, the herd may be getting a little shaken up here.
Technical:
The 30-40k area is a broad support level, some of our followers had low ball orders around 30k to catch a oversold dip. Many were filled and when it bounced back into the 40's we were mentioning lock something in on this bounce. But why? Get to that in a few, but lets finish up the weekly chart first.
I am expecting 30k to hold as support, but we have pretty much sold off the entire week and are closing in on the low. Not good. IF 30k does not hold, 20k is next support and it is now in play. (Brief dips into the upper 20's may happen but as long as it pushes back into the 30k, that constitutes a hold so I want to be as clear as possible for the trolls)
We should NOT push lower than 20k, this would lean heavily that we are entering a more broad correction that could lead to another crypto winter. Not sure sentiment is there yet, still many buying the dip, lots of liquidity in the market, so I am not convinced this is that phase of the cycle. Still looking for another leg higher, but when?
From an EW standpoint, appears we are in a mid cycle wave 4 part of a broader wave 3. Nothing is for certain, but there have been many that sat on the sidelines waiting for an opportunity to get in. Have several friends asking about Bitcoin now, they want to add some, but were not sure if this is the time.
Wave 4 corrections can last months and months and months, look no further than gold which went through a 6 month plus 4th wave correction. So time to add?
Well we are getting to where it is interesting and many that were looking to get in, but hesitated may start adding here slowly. As new participants come in, others buy back inventory sold at higher levels, and as long as the herd is still buying the dip, we will eventually find a bottom. This will be the beginning of the next accumulation mode that pushes us higher. But still too early to be aggressive and here is why.
Short term:
Price action is a prelude to market sentiment. Note the prior outside candle where the next candle continued higher. That was missing in the last pullback, and then it started taking out lows. Hence my little read articles last weekend prior to this pullback about the moment of truth.
Though the dip to 30k was short lived, the bounce was not that impressive, barely getting back to the 38.2% retrace of the prevailing bearish swing. The market also failed to take back 42k which was prior support now resistance.
A close below 34k implies the market is not finding enough buy side strength and lower levels are on the horizon, but how low? There are still some out there that want to get in, but have not pulled the trigger. Not just friends, but potentially some larger institutions, potentially some companies adding to balance sheets, and also some gov't entities.
Smart money accumulates into the lows, and this is what we need to see, signs of accumulation and the market discovery of price. Remember new technologies take time to discover price, so how can we measure what might be the faire market value of Bitcoin?
Trend lines are the simplest technical indicator and IMO one of if not the most useful indicator there is. Looking back at the broader trend fair market value is around 20k right now based on the trend. If I didn't have any Bitcoin, we start pushing into the 20's I would probably start dipping my toes in the water.
Like everything else in life, adoption of new technologies is a trend. We saw the tech market back in the 90's get ahead of itself, pullback was harsh, for those of us old enough to remember, but these new technologies did not disappear, sure some of the crap companies did, but the Amazon's, Google's and Facebook companies of the world prevailed.
Now it could take weeks or months for the crypto market to stabilize and find a bottom, so patience is still key. Looking to add back some inventory sold at higher levels, reasonable to start with some small bites here. Similar strategy I have with Gold, I will buy back inventory sold at higher levels when I have an opportunity at lower ones.
I am less concerned with technicals and simply take the long term approach. It is luck to buy the bottom, that low may never come, so if I sold some say 1 BTC at 54k, no reason not to add some of that back here. I get my inventory back and also 20k, essentially making it a free coin assuming you have no buys above 20k.
This strategy may require you to sit through another crypto winter, but if you are long term, what does it matter.
Sure there may be some better deals on the horizon, but with some experience behind me, I also have seen markets get away and I ended up kicking myself in the ass, for not buying it back when I could. I am always focused on the 3-5-10 year time frame, not get rich quick. Most can't focus that long, want instant gratification, no different than a herd of gazelles.
See gazelles are focused on eating now, ohhh there is a green pasture, lets run over there and fatten up. However the lion lurks and waits for opportunity. They see the green grass, they know the herd is going to come to pasture so they pick a spot and wait.
They wait for the herd to feel comfortable eating to their hearts contempt, and the more they eat, the more contempt they feel, and that is when the lion takes advantage. See the herd feels the safest at the WRONG TIME!
Yes three weeks ago everyone felt safe buying the dip, after all it worked twice before, but as we warn, sometimes the dip can keep on dipping. The same can happen here, though I believe there is a low to be found in the mid to upper 20's.
Remember this has been nearly a 4 month consolidation at the highs, and when it breaks the range, it is generally decisive and quick. Though warning flags were everywhere, few took the opportunity to unload at higher prices, especially in the ridiculous crap coin market.
Now again if you are 20-30 something, and you are focused on 10-20 year time horizon, nothing wrong with HODLING and adding more on these broader dips. I am always in favor of DCA over a lifetime, it is a very difficult strategy to beat trading. But is this the time to go all in?
Throughout the week had many telling me, "dude I'm buying the dip, but DOGE, EOS, ADA, XRP" yada yada yada, the irony is few sold at higher levels. They are cost averaging up, when the market still very vulnerable and this leads to bag holding, and you don't want bags of crap.
If you bought DOGE at 5 cents and rode it to 75 cents, did not sell any, and are now loading up at 30, you can see how quickly this can lead to being upside down, and blowing out your position at the wrong time.
When everyone turns bear, when we get all the FURU's flipping to 8-10k Bitcoin and my friends that bought the dip, cost averaged up, are then blowing out their positions, that is when I want to be all in.
In closing many felt comfortable over the past couple months, too comfortable, everyone was making money, everyone was getting in, so safety in numbers right? Well the Herd Feels Safest at the WRONG TIME, yet few are able to break the emotional barrier and take advantage of it.
However for those of us that did, these pullbacks are as exciting as most were when BTC hit 62k. Why? Because we actually have money sitting in wait to take advantage of the herd. Many of our members are excited about the pullback, not wondering what they should be doing, but looking to take advantage of the frenzy!
It did not happen overnight, we preach patience, patience, patience and when you think you have been patient enough, wait a little more. You had to stick to the plan and strategy for 3 years and at times it was dull, but in the long run it worked.
The best opportunities come when we least expect it, but it is only an opportunity if you can take advantage of it!
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