Bitcoin Going Through the Roof - What About the Basement?
We have seen a new all-time high for Bitcoin recently, followed by a huge pricedrop. And although it has bounced back up (and strong arguments can be made that it will rise to way higher all time highs in the future - see for example this video) it might drop again - even lower than the lowest level of yesterday: around 5100 USD/ 4350 EUR (on Coinbase).
Cognitive Bias: Be Warned
In predicting the future there is no knowing of facts, just assumptions of likelihood. Those assumptions can be based on facts in the past though. We should however be aware that facts in the past can misguide us, via cognitive biases that are easy pitfalls for human beings, especially in trading. Like the confirmation bias that makes us look for confirmation of what we already believe instead of looking for facts that disprove our belief. Professional poker player Liv Boeree explains it excellently in the video below.
A Pattern Emerges
That being said, the past sometimes shows patterns. Patterns that can be quite obvious, if you look for them (which invites the danger of cognitive biases to misguide you, let's stay aware of that!). Technical Analysis of price movements makes us see patterns in the past, which might occur likewise - but certainly not certain - in the future.
In the graph below, I have highlighted the recent all-time high and two previous all-time highs - including what followed directly after those all-time highs. And that shows us an interesting pattern:
(1) right after both all-time highs; (2) the price drops, touching the yellow line that I have drawn; (3) the price goes up; (4) the price goes down again, not only touching but breaking through the yellow line - in the second case ultimately reaching a level below the black line that I have drawn, indicating the all-time high of the before last bullish movement.
It is interesting to see that the pattern that I described is thus far quite neatly followed by the price movement of the last few days. It might confirm that the price can go down even more, soon, to a level below 4960 USD/ 4200 EUR (see the yellow and black line). Or it might be an occurence of confirmation bias... What do you think? Let's discuss what possible paths Bitcoin can take in the next few days - and beyond.