I do not have too much time right now, so this update will be a brief one that continues a series of price pieces that I wrote over the years. In my last article I wondered if we had seen the bottom and concuded that bitcoin could have reasonably seen the bottom and that one of the first indicators would be breaking a bearish triangle to the upside (it was actually a bear flag at the time). Obviously that happened by now.
I also mentioned that I would be looking for confirmation of that move and that there is no need to FOMO if it happens. That part is the real reason I am writing this short update.
Bitcoin charts — the current situation
Bitcoin first broke the large triangle that everyone was talking about for a good six months (blue above), when it finally tumbled through $5,800/$6,000 late in 2018. It then consolidated, broke a bear flag (which I called a triangle in my article linked above) sideways (not to the upside) and formed a larger triangle (red above). That was finally broken a few weeks ago with a strong move up that saw very healthy volume as well (if it is not fake).
My read on the current situation is that it is very likely to be a re-test of the $5,800/$6,000 break-down level from the blue triangle. As with almost every break-out, people usually do not need to chase it as price has a tendency to come back (close) to it. So in my opinion, the current move, including the red triangle is most likely a consolidation from the stark fall after price broke the blue triangle. Bitcoin reached as high as $5,477 in this last push up, which is high enough for me to consider the re-test complete, however it is entirely possible that the price first re-visits the $6,000 area directly. I personally am not in a hurry to chase any of these moves.
Purely from a technical perspective, we are in the process of building out a potential bottom. There are two possible routes that I can see from here.
Likely price development routes from here
- Scenario A: Most Bullish
In this scenario, Bitcoin continues to rise up to $6,000 and either “organic” demand (chuckle) or the folks at tether push the price so far above $6,000 that not only are most short stops (that I suspect are placed around there) being run, but also when the price finally calms down the $6k level actually functions as support. If that support holds, I would personally be happy to be exposed to bitcoin again for part of my portfolio. Note that this would again be after the re-test (of $6,000). I would not FOMO into any move that goes through that level at first as it may well fall back below.
- Scenario B1: Most Sustainable
In this scenario, bitcoin ends the current wave up somewhere between now ($5,300) and $6,400 and then falls back to re-test the red triangle break out. This is likely to co-incide with numerous “golden crosses” in the moving averages (when a short-term moving average crosses above a long-term one) and these are considered good long opportunities. If the triangle break-out level (broadly speaking the area between $3,800 and $4,300 or close to it) is able to sustain the fall, I would consider the re-test to be successful. In my view, it would be very likely for bitcoin to break $6,000 sustainably afterwards. It would represent the strongest of the scenarios presented here in my view.
- Scenario B2: Bearish
This is practically the same as B1, with one exception. The area around the red triangle break out fails to sustain the price and only causes a small bounce that is sold again. If this comes to pass, unless the fall is extremely rapid from $4,000 to $3,000 (in which case it may form a V-bottom and in tandem with the first fall to that area, an “Adam and Eve” bottom), I expect the bear market to last much longer and go much deeper. I do not see it as likely that the December 2018 low will be able to keep the price from eventually falling as low as $1,000-$1,400.
Additional Considerations
- Sentiment: If you read a lot of my price-related articles, you will know that I like looking at sentiment indicators whenever I can find them. In crypto, sentiment changes very rapidly, so it has not always been a good guide for trading. However, I note that positioning short term is neutral to bearish on bitcoin, while it is super bullish on altcoins. A sentiment trader would assume the majority to be wrong, so this may indicate a move to the upside (akin to scenario A, or at least seeing the current wave end higher than where it is now in scenario B) in bitcoin is still coming, while altcoins may not participate fully.
- Tether: it is still there. That remains a very, very relevant tail-risk.
- Altcoins: they are still here too. I am not saying 100% of altcoins are worthless, but I am very, very certain that the intrinsic value of 95%+ is actually zero. So in order for this bear market to truly end, I would want to see a clear bifurcation between good assets (bitcoin, some altcoins that have a use case, even if it is a vague one) and bad ones (95%+ of altcoins). I am watching for this to happen before I can get comfortable that the bottom is in from a fundamental point of view. I have written a lot on the topic — check out my archive linked below if you’d like to read more.
- Regulatory: Crypto is still a world where investors do not get unalianable rights when they buy a token (like they would if they bought a legal security), where ‘OGs’ can (as a group; subconsciously or deliberately) manipulate prices easily and where the rules of the financial system seem to have little meaning. That is simply not likely to persist and I sure hope it doesn’t as I find it despicable. Check out a lot of my articles on the content side that deal with topics such as bitcoin as a potential currency of a major economy, illegal security token, the issues with the crypto community mindset and the biggest myths about crypto if you are interested in understanding what I mean.
Where does this leave us?
As I said before, we are currently in the process of building out a bottom in bitcoin prices. While a bottom forms, it can still fail and it often does.
Most price break-outs in most asset classes do not need to be chased to get a similarly good return at the end or at least a much higher certainty of not losig money. I am currently watching if either (a) bitcoin flips $6k from resistance to support and successfully tests it or (b) bitcoin successfully re-tests the $4,000 break out area from the red triangle and manages to put in a higher low after that before I give any consideration to being long.
My bias remains short and I am expecting both (a) and (b) to ultimately fail, but that is simply my bias. I will have absolutely no reservations to act against this bias if one of the two occurs. The main point of this article is — there is no reason to FOMO. It is almost always the wrong move and anyone who wants to can simply watch what happens regarding (a) and (b) now.
None of what I write is investment advice. It is always personal opinion.
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Lastly, the all important disclaimer: this is my personal opinion, not my professional advice. Most of all this is not investment advice in any way. Crypto assets can fluctuate widely in value and all of your capital can be lost. I have a 50/50 chance of being right. Any negative views expressed are solely aimed at the token in question, never at the development teams behind them for which I have utmost respect (if they are sincere).
