Has the Crypto market finally completed another cycle and is it ready for another one?
There are four distinct phases to a market. Bull, Bear, Capitulation and Accumulation
Today, by examining the Bitcoin chart we will determine which stage we are at and why. It is common for the crypto market to follow the bitcoin price, therefore in order to determine if the crypto market is going into a bull market, we will examine the bitcoin chart. So let's zoom out and have a look at the overall chart:
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As we can see from the chart, the first arrow shows the bull market phase. After that comes the Bear phase, then Capitulation. Capitulation is separate from the bear market, as there is a double bottom just before it, a sign that many traders look for to see if the asset they are looking for has found a bottom. However after a double bottom, there is further down, capitulation. Capitulation is when most people still in the market are now at a stage of despair and disbelief. This is where many people leave a market for good and believe it to be dead from there on.
After Capitulation follows accumulation. This is arguably the best point in time to enter a market. It is going sideways and simple investing tactic of adding 50-100 euros a week to your portfolio for the next 12 months is usually a very good idea. By adding small increments instead of just going all in, the purchase price averages out, and therefore there average entry point should be ideal.
So how does this all relate to today's situation?
It is my opinion that from the 18th of December 2017 until the 5th of November 2018 bitcoin was in a bear trend. From the 12th of November until today, I believe we were in the phase of Capitulation. There was a lot of despair in the crypto market during the capitulation phase, I sure felt it and the prices of many alt coins reflected this also.
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What happened today with the bitcoin price pump was very interesting. On the one hand, many indicators were showing that they were too high and they were primed for a pullback. On the other hand, bitcoin had broken over the neckline that was holding the price down the last few months, and sat above it for almost a day or so. This move was telling us that now that the price has briefly consolidated above the neckline, it is primed for a move up, just as we have seen.
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Also another interesting observation is that when looking into charts like these, we can assume that as violent as the downward movement was when the capitulation started, equally violent will be the raise, which is what we saw today a 1k$ spike!
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Having said this, I feel like we have completed another market cycle, have broken out of capitulation impressively and are now gearing up for a period of accumulation. This phase could be very generous towards alternative coins, as we have already seen in the past month that many of them have shown strength. In 2017, before the great bitcoin bull run, we saw an alternative coin bull run. This may be the case again.
For the near future I think bitcoin will rise slowly up to 6k and test that zone. Good news for BTC.
What we need to be vigilant about is that when Bitcoin pumps hard, alt coins drop hard. When bitcoin rises slowly, alt coins party. When bitcoin goes sideways, alt coins party. When bitcoin is going down, everything goes down. As such, make sure to use stop losses and trading platforms that allow for both stop losses and take profits like 3commas which i really love and helped me increase my portfolio significantly over the last few months.
Referral link for 3 commas: https://3commas.io/?c=Ttribe
Thank you all for reading my post. Take care and happy trading!
Paddy