As all of Bitcoin's price support seems to be failing, it is now looking pretty clear that Bitcoin is going to breach it's previous low of $5850 to continue downward. As the market sentiment turns to what I would finally consider Fear I am starting to feel more confident myself in this - from what I feel - predictable market behaviour.
Somewhere between Fear and Panic
Everybody who's in crypto knows the famous market psychology bubble chart by now and it often comes up in discussions about what the bottom of Bitcoin (or other markets) will be. The price of any asset mostly is a measure of market psychology and Bitcoin's price is no different.
The famous Wall St. market cycle psychology cheat sheet
There's a few versions of these floating around. Above is the Wall Street version, and below you'll find a more 'dumbed down' version that's also circulating within the crypto community.
A simpler version of the same concept
Not long ago as Bitcoin first broke it's downward trend line people were ready to call the bottom and heralding the return of the bull market, essentially placing us in the Disbelief-rally on the path to Optimism. I was calling for this to be the 'sucker's rally' a while ago when I predicted a dead cat bounce before continueing the bearish trend to the bottom. Truthfully, I had predicted a bigger bounce, perhaps up to $10K, and I am somewhat conflicted about this rather weak bounce to $8500 instead.
Many people thought we had passed the Anxiety/Fear phase and even called the previous drop to $5850 as being the Capitulation phase. But the market sentiment was still very hopeful, and it didn't remind me of last time's crypto winter at all. Now that we've broken the hope of those who went in for the sucker's rally, I feel we've finally reached the Anxiety/Fear phase what is next is going to be the true Capitulation and after that finally: Depression. And if you haven't been through that before - trust me, you ain't seen nothing yet. Let's see how strong your hands really are.
A predictable market is comforting
Still, the current bearish drop back to $6000 and probably below that does put us back on the predictable path, even if it hurts. It puts us back on track following the same market movements as last bubble from 2013/2014, as well as giving us a better matching graph to the famous market psychology bubble chart. Every bubble needs it's bull trap, apparently.I get some comfort out of the current drop because of this. The more the Bitcoin market mimicks it's previous historical behaviour as well as follow the market psychology chart, the more I am strengthened in my belief that all that has happened before will come to pass again. I am confident in riding the rollercoaster down (again), because I am confident that the cycle will keep continueing and the more it does, the more confident I get. I am sure that there are many others like me, and as more people start to follow these cycles the more self-fulfilling they become, of course. This is how HODL'ers are born, and sometime in the next 12 months or so is when you truly get to BTFD if you've got the heart for it.
When bottom?
I've been saying that we will drop below $5000 for several months now and I still fully expect it to do so. While I have been conservative in my estimations, as I try to be, by saying 'below $5000' I actually think the true bottom may be quite some ways below that. I do consider 'below $5000' a good time to start buying in slowly, dollar-cost-averaging. It's hard picking the exact bottom and easy to miss if you wait for the right time, but if you dollar-cost-average into it you will always eventually hit the bottom without missing it.As for what the potential Bitcoin bottoms may be, I see support levels at: $5400 (we'll drop right through it), $5000 (most likely won't hold). If $5000 breaks, there is weak support at $3600 but my gut tells me it will be pretty much straight down all the way to $3000 where I expect heavy support, perhaps even the true bottom. A $3000 Bitcoin feels like a perfect time to buy, both from my own gut feeling but also because this would match the behaviour of the 2014 bubble bust when after the sucker's rally up to about $600-700 we dropped to $200. Going from $8500 to $3000 feels like a similar move in comparison.
And let's not forget the all-important logarithmic chart:
Bitcoin's logarithmic chart from 2013/2014 until 2018
When I made the above chart it was before we went temporarily bullish to $8500, but the point remains the same. In order to truly bottom out on the logarithmic chart, we would need to hit $3000-4000 more or less. This was true 2-3 months ago when I first predicted it and it remains true today.
Should $3000 not hold, I would myself start to be rather uneasy. Further supports should form at $1850 and at the absolute lowest I could possibly see Bitcoin go at about $1200 each.
BTC looks terrible but ETH looks very interesting
I'm a strong believer of the logarithmic charts and I think Bitcoin's chart is indicative of a long bear market just like last time. What's interesting though - very interesting - is how different Ethereum's chart looks from Bitcoin's.
Ethereum's logarithmic chart from it's inception in 2016 until today
Where Bitcoin's logarithmic chart looks like it has some ways to go before bottoming out, that's not the feeling I get from the Ethereum chart. Ethereum looks like it's well on it's way on finding a bottom, although it's hard to say without more price history to go off on. Ethereum hasn't had as many cycles as Bitcoin has, but the differences between the two logarithmic charts is uncanny.
It wouldn't surprise me either if Ethereum were to go bullish before Bitcoin does. Even disregarding the logarithmic chart, there's a lot of big industry leaders who are and have been flat-out telling everybody that Ethereum is going to be huge. With as much development and investment in it there's bound to be a swing of the pendulum where it starts paying off at some point. And the further Bitcoin goes down the more it brings all the altcoins down. At some point the price has to decouple. Ihave a very hard time imagining Ethereum dropping back to pre-bubble levels, even with Bitcoin selling pressure. This could cause a situation where Bitcoin continues to go down, but Ethereum goes bullish because it's so darn cheap - perhaps even temporarily causing a Flippening to happen - until Bitcoin finally bottoms out and returns to show everyone that you do not underestimate a giant who sleeps.
The sooner we bottom out the better, obviously, but market psychology is stronger than my hope and while I think it would be beneficial if we reached $3000 as soon as possible it is very unlikely and a lot more probable that we're going to see a longer more drawn out process just like last time. Turning people depressed and disillusioned isn't a quick process, unfortunately (in any other context this would sound weird). I think it's very likely that we'll continue the bearish market for another 6 months at least, and perhaps even another full year. Depression is slow, long winded, boring and quite frankly: depressive.
Sometime in 2019 I expect a re-ignition, when the upcoming halvening is sure to cause another round of FOMO and hopefully the next big bubble.
What to do until then?
If you believe in Bitcoin, then the same thing we always do of course: We HODL.
They're not shaking me out of this market! They can buy my BTC for $200.000 each, or not at all.
This is why you should never invest more than you're willing to lose. It's nearly impossible to get this emotionally detached otherwise.