Ever since bitcoin fell from $14,000 to $7,000, people seem on edge. My Twitter and YouTube feeds are full of people calling for a dump.
Relax, guys. This is just bitcoin doing what it does. It goes up like crazy, then crashes hard.
When it’s up, people say “Adoption! Development! Bull Market!” and point to good news. When it’s down, people say “Manipulation! Government Crackdown! Bear Market!” and point to bad news.
Honestly, nobody really knows. It’s all speculative.
Don't worry about that. Look at the big picture and notice two really big, long-term trends.
Price go up
Look at this chart of bitcoin’s price:
While the chart only goes to fall 2018, bitcoin’s price today is about the same as it was back then.
What do you notice?
Bitcoin’s price goes up. A lot.
Do you have any evidence there’s anything happening now that would make that trend change? I don’t.
On fact, bitcoin’s price could drop another 50% and still the long-term trajectory would remain the same.
(Up.)
Market Cycles
I’m not a trader but I try to understand the dynamics around everything I put money into. This means “technical analysis” aka studying how markets move prices up and down.
One very well-established measure of market cycle is called Elliot Wave Theory. It posits that prices move in 5 waves:
- Up
- Down but not as low as wave 1
- Up
- Down but not as low as wave 3
- Up
After the 5th wave, you get a zig-zag back down. Sometimes the zig-zag goes back to wave 5, usually the zig-zag stops somewhere higher. You mark the zig-zag as “a” down, “b” bounce, “c” capitulation.
Now look at this chart:
The dotted line represents the first wave of the first cycle. That cycle ended with the great bear market of 2014-2015, where lots of people threw away their hard drives, forgot their keys, and gave up on bitcoin. That's what happens at the end of these Elliott Waves. People just give up.
If I’m right, we just started wave 3 of the second market cycle, meaning prices should go up for a while. Not straight up, just more up than down.
NOBODY IS GIVING UP.
Of course, others will draw their lines differently and end up with different calculations of waves. I could be wrong. So, take it with a grain of salt and don’t hate me when bitcoin crashes to $1,000 and you lose all your money.
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