For anybody who’s a long-term bull like me, bitcoin’s breakdown on November 14 likely felt like a dark day in crypto. For a few key reasons, the supposedly stable bottom previously held in the 5.8K to 6K range simply collapsed. Since then, it’s been a free-fall to an unknown bottom.
To be honest, this was a surprise as much as it wasn’t a surprise. Why? I’ll explain my thoughts, dating back to my first published idea on April 6.
I declared on April 6 that was , using key regression indicators for my supporting arguments. At the time, that call was spot-on — for SHORT-term investing. And let’s be clear: that was my mindset. After all, I labeled my investment strategy “short.”
However, if we were to look long-term, we should have seen an obvious dynamic at play. Simply stated, bitcoin dropped from 19K to 6K too quickly, so regression analytics favored a bounce back. That much occurred, and reached the 9.8K area. However, with such a quick approach to the bottom precedes a more stable return to the bottom. Thus, the approach to 9.8K was short-lived as well. was destined to head back to the 6K range for an extended period of time. That too played out reasonably. From early September to mid-November, remained between 6K and 7K. This was something I also called (to an extent — correct idea, incorrect follow-up) when I claimed at the end of August that .
All this price action made sense — until November 14. In a few hours, the bottom was gone. If you were at work like me, you probably missed the action, which is why stop-losses are important! If you had that stop-loss at 5.5K to 5.7K, maybe you were feeling queasy for a few days, but then November 19 came. Gone was 5K! And suddenly you made a simple, yet brilliant move to protect yourself from disaster.
I’ll be honest with you. I still contend had established a bottom in the 5.8K to 6K range. However, I’m also not surprised that bottom feel out, causing us to currently test the 200-week moving average, as seen in this chart (I had to use instead of the preferred Coinbase, because has the sufficient data range to show a lengthy 200W-MA.) That’s because wasn’t ready yet to recover from the bottom quickly, leaving it vulnerable to some extent of a sudden capitulation. Personally, I believe the childish drama surrounding the Cash fork either soured or scared off many retail investors, causing a sudden drop. Combine that with the countless stop-losses always in play, and the drop was amplified by the order automation. Let’s be clear: this in itself can create a new bottom for , because all cryptocurrency assets are still in a mostly-speculative stage, causing abnormal .
Now, for my point: we still have one more major test before we confirm the bottom for the next year or so. Yes, I’m talking LONG-term this time. That one major test is shown in the chart, and it’s the 200-week moving average. As I type this, the 200W-MA is at about $3178, which is close to the active price on . Meanwhile, the weekly indicates an oversell for the first time since completed its December 2017 peak. By all means, there is an argument to make that we have met the bottom. HOWEVER, we need to this play out and be confirmed! The test is happening right now!
If fails to uphold this 200-week moving average, expect some level of capitulation in the next few weeks. And it’ll be quite familiar to that least green wave of FOMO we experienced almost exactly one year ago. Crazy.
Once this specific drama plays out, I’ll most likely be ready to buy, because I believe this drama will most likely determine where our long-term (re: 1-2 year) bottom will be. Until then though, I’ll just type out my thoughts. Happy trading, my friends!
Published at Sat, 15 Dec 2018 17:09:08 +0000
