Bitcoin - Is This the Big Dip the Shorts Have Been Waiting For?
After a few weeks of hibernation, the bears have awoken and are trolling up the sites with their calls once again for capitulation into the Abyss. Are they finally right? Well the old saying "The Sky is Falling" is not new to this or any market. I remember many perma-bears that were calling for a 50% retrace on the S&P in 2015-2016 and after a mild correction, we have more than doubled. Eventually perma-bears are right, however, their timing is often off. Even if we pullback 50% now we are still higher than the calls for 800 that were rampant among these analysts just 3 years ago.
Bitcoin' bears are no different except for they are on steroids. Here comes out of the woodwork, all the bears that for so many weeks we did not hear from. They were gone, absent from blowing up our blog here with a bunch of useless charts and nonsense calls. Again we are not fortune tellers, and anyone that claims to have the holy grail of chart analysts is simply lying. But nothing like the revival of bears on any pullback or market correction.
Breakout:
The broad 2 month consolidation led to a breakout, but unfortunately for bulls it was to the downside. As a long term investor we had a few orders in at 6100 and 5600 to take advantage of a fast selloff. One reason longer consolidations result in strong moves is money flow. After months of positioning, the breakout determines the winner, and the losers close out trades. The longer the consolidation the more participants there are to close trades. It is really that simple.
Yet we were also looking for a quicker rebound which is not happening. So where to now, since it appears we are showing continued weakness?
Support level:
The 4750 area is now in play here. No bones about it, if 5200 fails to hold, we likely see the mid to upper 4k area before we see buyers step in. This is what separates strong from weak hands, which we wrote about in depth in our portfolio management article. If you are a long term investor, and believe in the future of Bitcoin' these types of pullbacks should be welcomed, not create impulsive trading disorder.
If you are like myself, I still have cash waiting to be deployed into the market. You think I want higher prices? Heck no, I want lower prices. Because I am using cash I do not need in the next few years, it is insignificant what the market does in the short term. Though many are hooting and hollering how they guessed right the direction, we are simply letting the market play out and looking to add for the longer term.
Why would we be looking to add?
Again our long term outlook is bullish for Bitcoin'. If it takes 6 months or 2 years to retest 20k, our position is we eventually retest the previous high. If this takes 2 years to do, this is nearly a 200% annual return, based on current prices. Who wouldn't like those kinds of returns? Only those who think they can out smart the market in the shorter term.
So while the Magical Wizards of charts flip from long to short, if this, maybe that, could go up, could go down, and simply guessing. The question any investor should be asking is how do I position, not whether we go up or down. This is what separates amateurs from seasoned investors.
There are two positions here, one Bitcoin' moves up in the long term, and second, Bitcoin' capitulates into the Abyss over time. How you side with this longer term view dictates how you position yourself. If you are a perma-bear, you are building short positions into every rally, which is opposite of being a perma-bull whom is looking to add inventory as the market sells off. Trying to day or swing trade horizontal non trending markets is very risky. Using tight stops runs the risks of getting knocked out more often than not. Using loose stops runs the risk of trading capital deterioration. In short this is a good market for longer term investors to add slowly into positions and build up inventory.
One comment I get a lot is, why not sell here if lower prices are likely? Well again are they? The thing about timing tops and bottoms is this is only successfully done often by Liars. I simply ask myself, are we closer to a bottom or to a top? This determines my position, not trying to time the exact bottom. Look at Amazon which pulled back from 110 to 5 then rallied to 1900. You think those who sold in 2001 are not kicking themselves for not holding and buying into the weakness? Same goes with Apple and many of the other tech stocks.
Trying to time the market is a game of liars poker. Anyone that tells you they have the secret to finding tops and bottoms is simply a liar. Ohhh you will hear them with their "got out just in time", or "hope you locked in gains on that trade", yet the target was never hit. They will disclaim this by, "well you have to manage the trade once it is triggered". HUH? Funny how those analysts always seem to be on the right side of just about every trade. Hmmm
So as a longer term investor, I would love to add some Bitcoin' at 4500-4800. Remember last year after Bitcoin' broke 6250 and everyone was crying "ohhhh I will never get a chance to buy under 5k again, its over". Well here's your chance, however, few will have the mental toughness to step in front of the train here.
Regardless, there is no reason to panic, this is obviously a news selloff as Marc pointed out in his recent TV article. Buy the rumor sell the news, is as old as the Roman traders. The rumor of the BCH' fork had everyone buying in. In addition the threats of someone bringing down Bitcoin' is simply nonsense, but the market are buying into it. Or wait, maybe this was a bunch of crap, just to further remove coins from the FUD followers, into the hands of larger institutions.
It really doesn't matter one way or the other. If you are long term, align your thoughts that direction. If you are concerned about the market moving to $2500, maybe your position size is to large. However, if you are a strong hand, and do not need the money in the next couple years, why wouldn't you be looking to add.
Not that this is a place to jump all in, by all means it is not. Yet if you have set aside some capital to buy into weakness, nothing wrong with adding a small position here. This is why we almost always have a cash position in our portfolio.
In the end whether we push lower or not should not determine your longer term position, one way or the other. It is most important you understand at any time in the market, all news and events are already priced in. This is an unregulated market, so people can say what they want to move the herd out of trades, creating sellers large investors and institutions need to accumulate coins. You believe there could not be motivation behind the FUD we are hearing? I am unmoved by this, and would love a pullback to buy more. It is like silver, you can never have enough when the bull market returns. What will be in your wallet?
As usual, If you are going to smack 30 charts below detailing how you nailed it, at least give me a thumbs up!
Bitcoin' bears are no different except for they are on steroids. Here comes out of the woodwork, all the bears that for so many weeks we did not hear from. They were gone, absent from blowing up our blog here with a bunch of useless charts and nonsense calls. Again we are not fortune tellers, and anyone that claims to have the holy grail of chart analysts is simply lying. But nothing like the revival of bears on any pullback or market correction.
Breakout:
The broad 2 month consolidation led to a breakout, but unfortunately for bulls it was to the downside. As a long term investor we had a few orders in at 6100 and 5600 to take advantage of a fast selloff. One reason longer consolidations result in strong moves is money flow. After months of positioning, the breakout determines the winner, and the losers close out trades. The longer the consolidation the more participants there are to close trades. It is really that simple.
Yet we were also looking for a quicker rebound which is not happening. So where to now, since it appears we are showing continued weakness?
Support level:
The 4750 area is now in play here. No bones about it, if 5200 fails to hold, we likely see the mid to upper 4k area before we see buyers step in. This is what separates strong from weak hands, which we wrote about in depth in our portfolio management article. If you are a long term investor, and believe in the future of Bitcoin' these types of pullbacks should be welcomed, not create impulsive trading disorder.
If you are like myself, I still have cash waiting to be deployed into the market. You think I want higher prices? Heck no, I want lower prices. Because I am using cash I do not need in the next few years, it is insignificant what the market does in the short term. Though many are hooting and hollering how they guessed right the direction, we are simply letting the market play out and looking to add for the longer term.
Why would we be looking to add?
Again our long term outlook is bullish for Bitcoin'. If it takes 6 months or 2 years to retest 20k, our position is we eventually retest the previous high. If this takes 2 years to do, this is nearly a 200% annual return, based on current prices. Who wouldn't like those kinds of returns? Only those who think they can out smart the market in the shorter term.
So while the Magical Wizards of charts flip from long to short, if this, maybe that, could go up, could go down, and simply guessing. The question any investor should be asking is how do I position, not whether we go up or down. This is what separates amateurs from seasoned investors.
There are two positions here, one Bitcoin' moves up in the long term, and second, Bitcoin' capitulates into the Abyss over time. How you side with this longer term view dictates how you position yourself. If you are a perma-bear, you are building short positions into every rally, which is opposite of being a perma-bull whom is looking to add inventory as the market sells off. Trying to day or swing trade horizontal non trending markets is very risky. Using tight stops runs the risks of getting knocked out more often than not. Using loose stops runs the risk of trading capital deterioration. In short this is a good market for longer term investors to add slowly into positions and build up inventory.
One comment I get a lot is, why not sell here if lower prices are likely? Well again are they? The thing about timing tops and bottoms is this is only successfully done often by Liars. I simply ask myself, are we closer to a bottom or to a top? This determines my position, not trying to time the exact bottom. Look at Amazon which pulled back from 110 to 5 then rallied to 1900. You think those who sold in 2001 are not kicking themselves for not holding and buying into the weakness? Same goes with Apple and many of the other tech stocks.
Trying to time the market is a game of liars poker. Anyone that tells you they have the secret to finding tops and bottoms is simply a liar. Ohhh you will hear them with their "got out just in time", or "hope you locked in gains on that trade", yet the target was never hit. They will disclaim this by, "well you have to manage the trade once it is triggered". HUH? Funny how those analysts always seem to be on the right side of just about every trade. Hmmm
So as a longer term investor, I would love to add some Bitcoin' at 4500-4800. Remember last year after Bitcoin' broke 6250 and everyone was crying "ohhhh I will never get a chance to buy under 5k again, its over". Well here's your chance, however, few will have the mental toughness to step in front of the train here.
Regardless, there is no reason to panic, this is obviously a news selloff as Marc pointed out in his recent TV article. Buy the rumor sell the news, is as old as the Roman traders. The rumor of the BCH' fork had everyone buying in. In addition the threats of someone bringing down Bitcoin' is simply nonsense, but the market are buying into it. Or wait, maybe this was a bunch of crap, just to further remove coins from the FUD followers, into the hands of larger institutions.
It really doesn't matter one way or the other. If you are long term, align your thoughts that direction. If you are concerned about the market moving to $2500, maybe your position size is to large. However, if you are a strong hand, and do not need the money in the next couple years, why wouldn't you be looking to add.
Not that this is a place to jump all in, by all means it is not. Yet if you have set aside some capital to buy into weakness, nothing wrong with adding a small position here. This is why we almost always have a cash position in our portfolio.
In the end whether we push lower or not should not determine your longer term position, one way or the other. It is most important you understand at any time in the market, all news and events are already priced in. This is an unregulated market, so people can say what they want to move the herd out of trades, creating sellers large investors and institutions need to accumulate coins. You believe there could not be motivation behind the FUD we are hearing? I am unmoved by this, and would love a pullback to buy more. It is like silver, you can never have enough when the bull market returns. What will be in your wallet?
As usual, If you are going to smack 30 charts below detailing how you nailed it, at least give me a thumbs up!
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