Is Technical Analysis a useful tool, or is it akin to reading tea leaves and studying goat entrails? And, if it is useful, what kind of TA? Because there are many, and they’re prone to sometimes being contradictory. Some swear by MACD, some by RSI, moving averages of varying lengths, Japanese candlesticks — the list goes on and on.
Okay, a confession. Although I’ve studied different types of TA, I’ve rarely used it. Sure, I make little micro-trades on Hive-Engine almost every day. But in my heart of hearts, I’m just not a day trader. Making significant moves in and out of the market daily? I wouldn’t be able to sleep at night.
But what about Bitcoin specifically? Is there a way to make informed decisions about when to hold and when to sell?
I’ve got some Bitcoin that I truly own, as in I have private keys. That I intend to hodl for a long, long, long time.
But I also hold some indirectly in Grayscale Bitcoin Trust (GBTC). With it, I might be willing to trade in and out of it, at least by trying to time significant peaks and valleys.
The stock-to-flow charts from PlanB (@100trillionUSD on Twitter) seem to suggest that Bitcoin may have a strong peak in the late summer or early fall of 2021. And if patterns from previous Bitcoin halvenings are any guide, then a selloff with a low in 2022 or maybe 2023. Is there a way to time those market moves on a more granular level? Buy low, sell high is nice advice but how do you know when to sell?
If you hunt around the intertubes, you’ll find 1Y+ Hodl wave and mvrv-z-score charts that look like fairly useful tools for market timing Bitcoin. They’re well worth studying.
But there’s another chart that at least seems to offer a guide to how to sell at the market peak of this Bitcoin cycle: the RHODL Ratio. Take a look at this chart.
Is it The Holy Grail?
Hypothetically, Bitcoin goes parabolic later this year. Maybe you hope to sell at the peak. But with a blowoff parabolic move, greed might well cloud your judgement. Just a little bit more. So after what later turns out to be the peak, the price drops like a rock. Your heart skips a beat. You wonder if you missed the peak. But a dead cat bounce gives you psychological relief. Maybe it’ll go even higher. Braver now, you hodl as it goes up. And then the price falls off a cliff, dropping by $10,000 over the course of 15 minutes.
You reassure yourself that it’ll stabilize. But you’re wrong; it drops even more. And then more.
You’re rekt.
But what if in advance of the disaster you’d had a way to time the top?
Look at that chart again. Zoom into the 2011, 2013, and 2017 peaks. In all three cases, mere days after the RHODL Ratio crossed into the red zone, Bitcoin hit its peak.
Just a coincidence?
Disclaimer: This should not be construed as financial advice. I am not a registered financial advisor; I don’t even play one on TV. Do your own due diligence. Batteries not included. Objects may be larger than they appear in mirror. Some assembly required. Do not taunt Happy Fun Ball.
Image credit: geralt — Pixabay (source)