Friday 29/06/2019, 10:55CET
As usual I like to look at fundamental chart analysis to give me a backdrop onto which to read the news and updates of the crypto world. Together I think this gives a nice indicator of where the market is heading in the medium term and be able to trade and profit from moves.
For those that follow me already, I have been away for the last 3 weeks to take some time "offline" and get some distance from the online world. See and experience some new things. What I chose to do is get on my motorcycle just ride. I headed east to see what the new EU nations are like. The trip ended up being a 4000 km lap around Eastern Europe including Croatia, Bosnia-Herzegovina, Serbia, Romania and Hungary.
During the trip I was online only as much as I needed to be to stay in touch with family and be able to navigate around cities with google maps. I did occasionally look at Coinmarketcap, but did not overly obsess about price action.
a pic of my trusty steed
I am glad I did keep this distance or else I may have made some rash trades and stressed out more than I should have with where things are going at the moment.
So where are we at the moment in my opinion?
Well our support at the 6k level has somewhat broken down and simple chart trend analysis tells me that we are in a bearish descending channel/wedge, and skipping along the bottom of it.
btcusd 1d -[bitfinex]
At the time of writing this, we sit at the 5900USD handle.
The local low was it last sunday 24/6 at 5755USD
The hourly chart shows the strong rebound candle that we got as we dropped to this level
The volume was not exceptional but if you compare the volume of the sell candles that lead to this low and the rebound volume, we see that the sellers are not so strong, but the buyers neither. This leaves the market open to strong swings on low volumes.
I do not see anything on the horizon that will change this situation in a hurry. The Crypto madness of 9 months ago has passed and most people have moved on, or moved back to their lives. There are those that are holding major losses. Those that threw the kitchen sink, along with everything else into crypto in Nov 2017.
As a sidenote: let's have some context. Today's price was the all time high on 20th Oct 2017.
And revisited it again about a month later after a sickening >30% drop in 4 days!
Checkout the moving averages! Even this seemingly major drop was only a revisit of the 21-50 day moving average!
The monster rally of Bitcoin (and cryptos in general) of late 2017 and early 2018 had collected quite a lot of weak money that has to get shaken off.
These were the days of super high volatility. Where it was possible to see a daily change in price that exceeded the overall price of a bitcoin at the start of that same year!
We who stick with cryptos should take this as a lesson to spot a making of a bubble.
I am watching this carefully and trying to learn how this works because the next run, I intend to not make the same mistakes again, or at least not to the same extent.
Macro Chart Analysis
Now let's close our eyes to the background noise and see what the charts say.
Scenario A - Worst case!
btcusd 1w log chart-[bitfinex]
The fibonacci retracement analysis of the bull market of 2017 looks like this.
I pegged the cycle low at 180 usd, though there were some flash crashes on the way down following the highs of 1175 usd back in late 2013 that went deeper than this. The 2017 bull market started back in early 2015. Before that the bear was in control of the market for over a year! with a complete price retracement of just over 85%.
Do I see 2014 happen again?
We would be silly to ignore this case. The fundamentals of the crypto world are so different this time compared to back then, but as I said, I am here to focus on chart analysis so clearing all this FUD and FOMO out of the way, I think we should consider the analytical state of the market and where support exists for BTC today.
Facts:
Bitcoin could not hold the 61.8% Fib retracement level at 7700 usd.
And now we struggle with holding the 6000 usd first bottom level.
According to fib analysis together with long term moving averages, I see next support at between 4620 and 4390 usd. (grey area)
This is the 78.6% fib retracement and the 100 week moving average.
We have about a 20% drop in front of us to get into this zone.__
Also if we look at price action around the end of Aug 2017 bitcoin this some resistance at this level confirming this to be a zone of interest or main market structure support and resistance.
I think as traders holding btc for investment purposes, riding out another 20% correction would be painful but not impossible. For those trading and already hurting at these prices, this could become a self fulfilling prophecy.
These people will fold and leave the space till the next bull is upon us and well confirmed and even then will wait too long to get in (and probably be burnt again. AKA "the dumb money")
I think this scenario, no matter how bearish it sounds has a more than even chance of playing out over the next few weeks to months. If history rarely repeats then it could be as much as another year! Ouch
It will be a slow and painful grind downward. In addition to this the alt coin market will suffer even more. We will see many scam and copy coins totally crash and fail, and this sentiment may also take out some more serious projects that get caught up in the FUD.
I feel that at the moment it is easier to predict the price levels than the timing.
Bitcoin seem to have had a bias toward bull cycles during the end of year periods, and where btc goes, alts follow.
So my simple opinion is that we will have our next bull cycle starting either autumn this year or next year.
Again I think timing is shrouded in too many variables. Because I am also using analysis of traditional markets in my overall view of the crypto markets (mainly to try and spot some hidden correlations that make crypto markets easier to predict), some hick up in the bond market could open a new crack in the traditional monetary world that will flow into crypto. Progress on a BTC ETF could be a catalyst for example. Very hard to say.
Channel analysis and timing
By identifying the descending channel in the very start of the blog, It was an obvious step to try to see if it will/could confirm timing of reaching the predicted support zone about the start of autumn this year.
This is what the chart looks like if we force this scenario timing...
btcusd 1w log chart-[bitfinex]
and this is how it would look to extend the bottom to next autumn (2019)...
btcusd 1w log chart-[bitfinex]
* note, in both of these, the top of the price zone being the current 100w ma, would no longer be valid
This little exercise also illustrates the inherent dangers of technical chart analysis. I can wiggle the lines to fit many scenarios. This is why biases must be consciously held at bay to have a clean reading of the charts. Sometimes it takes 3 weeks of off road trail bike touring to do this!
Ok, with that out of the way let's have another take on analysis...
Scenario B - Best case!
btcusd 1w -[bitfinex]
We see that after bouncing around at the 5800-6200 usd zone (grey area) for several weeks and, and then make a slow and laboured recovery.
I put this scenario as case B because the chart analysis does not support this outcome and it comes more from blind faith and hope. That the chance of external factors chasing enough money out of otherwise safer and traditional markets into cryptocurrencies may spark our next bull run. This is not technical chart analysis, but hope mixed with macro analysis of traditional markets.
I cannot belabour this any more because such analysis cannot be supported by pure chart analysis. That's why my chart screenshot does not zoom out so much. There is nothing to show to support this case.
Trading
Just being back from my bike trip, and pretty much being out of the crypto news cycle has cleaned my mind of crap that easily obliterates honest chart analysis with biases one may not even be aware of.
As you may have noticed already my posts are more of a blog of my own analysis. A way I can record my predictions honestly so I can go back over them and learn from where I have been in error.
This time, my analysis has lead me to get down to work and figure out a strategy to reduce exposure to the crypto market for the time being.
Method
I will not blindly sell all. This is silly and usually what the "dumb money" does.
I will sell into the inevitable short term rallies. The goal at the moment will be to stop when I have only 30-50% of currently invested capital left in crypto. Most in BTC, and keep a foot in just a select few of my favourite alts.
Then I will wait it out in cash positions and keep a close eye on the markets for signs of reversal come the end of summer.
Sorry I have made such a dour analysis, but it is what the charts tell me.
For this post, I would really like to get some engagement from you guys. Tell me what you think of my opinion. Everyone loves to hear good news and hates the bad, but it is this news that is the most important.
Any ape could have made a fortune in the bull market of 2017. All that was required was some capital and a bid dose of reckless abandon. How to hold onto ones gains is the hard part, and for that accepting bad news is crucial.
What do you think of my analysis?
How do you plan to trade this period?
Are you getting out, or are you holding on for the next bull run to a million per bitcoin?
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