Bitcoin – Markets Love Discontent – Invest Like a Fool

Back in December when Bitcoin was pushing 4k we mentioned that we were “optimistically cautious” about the rally.  The question at that time was “Has the Train Left the Station?”  For many Bitcoin is their first investment and cryptos are their first instrument of trade.  During 2017 it was pretty easy, just throw $500 at the market and you doubled your money in weeks if not days.  However markets are not kind to those who lack patience and discipline, to those who are greedy and quick to react.  In fact the market preys on those who look to get rich quick and the greed that follows.

How many of you have thought, “boy I wish I would have bought Bitcoin at $1000”.

The 2014 Fool

Many did buy in late 2013 at the peak, and had you bought at 1k you would have held for more than 3 years through much pain and not seen your investment become profitable again until early 2017.  I remember those investing in Bitcoin in 2014-2015 were called fools.  Hey I admit I was one of them, “why would you invest in Bitcoin don’t be a fool”.

However that investment would rise nearly 20 fold over the next 8 months.  In a world of instant gratification would you have had the emotional discipline to hold or even add at $250 in 2015?  Probably not, and like many currently they gave up or even sold before the rally.

Markets simply take advantage of those that are discontent with the current conditions.  We mentioned for weeks during the rally off 3k that bottoming is a process not an event.   Did you have the patients when you missed the long signal to wait? Or did you feel the impulsive nature to jump on the bandwagon?

Safety In Numbers

The content of following the herd, or succumbing to our natural emotions, are exactly the reason most fail in trading and investing.  Do you currently feel discontent, discouraged and pessimistic about the market?  Well you are not alone; the herd feels the same way and it is evident in price action.  Unfortunately the herd felt the same way in 2015.

How do I know this?  Well price action tells us everything.  Do you really think the herd was optimistic at 250 and pessimistic at 19k?  Do you think the herd is optimistic or pessimistic now?  For those that listened to the podcasts, Henry asked Wild Bill when he was adding to his stock portfolio in 2009, “did you ever feel like you shouldn’t be adding or wondering if the market was going to go to zero?”  What was Bill’s response “the lower it went the more encouraged I felt, the more I wanted to add to my positions.”

Those that separated themselves from the herd in 2015 and 2009 were paid off not in the short term, but in the long term.

Technical

Bitcoin Daily (Coinbase)

We mentioned back in December during the capitulation to 3k that bottoming was a process not an event.  I received numerous emails from our premium subscribers if they had missed the opportunity to get in near the bottom.  My response was simple, we likely get another chance at these or even lower levels.  In otherwords, if you want to add, buy a little, but leave some money on the side in case we pull back, because bottoming is a process not an event.

Well here we are, and many that were eager to jump in during the rally, are now glad they waited.  This is the part of the bottoming structure we were talking about or at least may be.  It is not uncommon after an extreme push to a new low that markets go back and retest these lows. Where the bottom is nobody knows for sure, but this type of move is not unexpected.

From a technical perspective we can push as low as 2800 and would still consider this a variation of a double bottom.  The area between 2800 and 3400 is a broad support range.  Anywhere in this area we could see a bullish reversal.  This is an area for accumulation not discontent if you are bullish in the long term.

The 3340 is a support level and if we fail to push through over the next day or two, we may see another rally towards 3600.  Keep in mind markets will tend to give away quickly at certain levels and the 3340 is one of those levels.  If it continues to find buyers at these levels, eventually sellers dry up and the subsequent move is a rally.  Ever notice how initial recovery rallies have a certain pattern to them?  Not that we have that pattern here, but will you be able to identify it if and when it does form?

However, nothing on this chart is bullish right now.  The market over the past couple weeks has been boring, out of favor and simply more painful to watch than being a Ram’s fan and watching the Super Bowl.

Opportunity

With that said here is where long term opportunity exists.  Do you have the discourse to ride out an out of favor market for weeks, months or another year?  Do you have the emotional and financial stamina to wade out another dip?  Or are you hoping to re-enter just at the beginning of the next bull run with some magical indicator and content with following the herd?

As far as trading goes, unfavorable markets are not good trading markets.  There just are not enough participants.  Until market favorability returns trading is difficult and risks should be managed accordingly.  But for investors there is opportunity.  Whether slowly stepping into a longer position trade, or adding inventory for the long term, this could be your 2015 opportunity.

The question is do you have the patience?

Summary:

One reason few ever get in at or even near the bottom is because the herd is pessimistic at these levels. They are selling which is the reason we have a bottom.  They are questioning themselves, “what if it goes lower?” The immediately call out anyone as an idiot that would buy at these levels, as this is an area to sell right?   If you do not have the patience and content to ride out bearish markets, to buy into an out of favor market, you will never reap the rewards of broader bullish moves when and if they happen.

If you are waiting for a sign to enter, well the sign is pretty clear, when the herd feels discontent about the market.  Did the herd fell discontent in 2015 or at the end of 2018?  If you could go back in time what was the sentiment surrounding the market in 2015?  Probably the same sentiment you feel now.

One of the things we focus on with our premium members is to forget about the current pain and focus on the future gains.  Would you call someone a fool that cost averaged into the bear market from 2014 to 2015 buying at 800 600 400 and 200? Bought a little every time it dipped further down?  Yeah that guy was a foolish investor wasn’t he.

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10 Responses
  1. jlhequities

    The only way to win with this market right now is DCA every week for the next 4-9 months. And this should be view as a minimum 2-3 year hold. I specifically went out and got a job for 1 reason only. To buy crypto every week for next 6 months. 100% of my paycheck going into crypto. When the bull does return I will add leverage longs for pumps. Can’t wait, hope it goes lower. But if not, that’s ok too.

  2. jlhequities

    trade forex, buy crypto. Forex is having great moves right now. Can use very high leverage with very small capital. Losses are nothing compared to longing a bunch of BTC and it drops $100. Way less risk in forex

  3. Stoimen Bardarov

    Great article, as always, Andrew! Many 10x for it. Now a harder question : how likely in your opinion is to see BTC in the next 10 years as parallel system (in terms of usage) of the fiat money transfer methods?

    1. Andrew Gonci

      Thanks Stoimen, I really look at Bitcoin like gold as I do not want to spend it but accumulate it personally. Maybe I am biased as a gold and silver stacker. However the first time I was introduced to Bitcoin was buying gold on APMEX they gave a discount for purchases in lieu of wiring the money or sending a check which reduced costs and expedited the process. I believe something like Litecoin or another coin (maybe XRP, Dash, Zcash) will become a more every day use currency. Litecoin seems to be the most versatile, has FMA and does not have the scaling challenges Ethereum or other smart coins have.

  4. Stoimen Bardarov

    By the way I’ve found another usage of TRON you might find interesting. I can provide the stats for the last two months, but for that time frame my bots (having 10 in 4 exchanges in total) are killing it at BTC/TRX 1 day trades. Here I am talking about 55.151 % gain with not that much price movement.

  5. mark R

    Nice article Andrew, and taking the perspective of the long term investor and there emotional ride. As for me sometimes I wonder even after doing my research and placing a trade I check myself to see was this an emotion filled trade or Spock Logic. Or to put it a different way did I fill my Spock logic with emotion. OK I think you get it.
    What I would like to talk about is the perspective used here on long term investing during down markets and the eventual outcome of a higher market. The market has a long history were as perspectively bitcoin is 12 years old. I went to Researching (unsubstantiated) Bitcoins history of rise and fall and what where the catalysts. In the beginning it was new .01 cent. and too get it well you had to be a computer geek. With Mt. Gox you could get in but most new the risk. By 2014 interest or knowledge of bitcoin grew. The slam of Mt Got and a few other mishappenings caused Bitcoins downward bear. But still it was a new growing commodity. Yet still unsure of its world usefulness. By 2016 and the use of coinbase it was much easier to obtain bitcoin. With returns being touted and the rise of other coins and market frenzy in 2017 the mass public world wide took notice. Unfortunately Bitcoin (and other crypto currencies) had not defined itself to the mass public who only started looking at it as a money maker (greed). The fall came. So to me the future is this. Bitcoin had its very large foray into the publics eye in 2017. ITs fall took the mass public out of it, just like in stocks in 2008-9. But Stocks have that long history so many investors like Wild Bill saw this and bought with patience in mind, as greed in the market always returns. But Bitcoin I think is different. For one it relatively has a short history and cannot rely on a long term perspective and thus something else has to be at work for this to be a viable entity. I think it is slowly making inroads into a practical use in the world. It is still being developed in useful but small ways all over the world. Those smoking guns we heard of back in 2017 ….ie mutual funds,ETFS, walll street players coming to town never took hold and legislation was mostly negative. But, As Bitcoin continues to grow and I believe it will then when the public is overwhelmed with seeing its use then it will come back into a wild growth. In the meantime we will take the baby steps to reach that place. Its nice to find you still spreading the little news. Thanks.

    1. Andrew Gonci

      Thank you Mark for the kind comments. I think larger players are already getting in, as the majority of trading Bitcoin now is handled OTC which is not accessible to the retail investor. I believe recently it was more than 60% of the volume transacted.

      What an ETF does it it brings accessibility to the masses as well as fund managers etc, that are bound by rules exempting them from trading or investing in non-regulated instruments. Look at it this way, the MJ ETF which is the cannabis play, has a market cap of 1 billion already. Yet the fees are high and why buy an ETF when you can buy the top companies outright since their stocks are regulated.

      Unlike the MJ ETF and companies within it, shares can not be dilluted, so as longer term investors buy and hold, circulating supply moves lower. Cron for example has 185 million shares out there, and many more warrants and options that will dillute the share price if exercised eventually. With Bitcoin there is a limited 21 million. Compare that to gold that has an estimated 10 billion ounces of which only 500,000 oz are stored in the US vault. Something like that anyways. If Bitcoin does become a store of wealth like gold, (i don’t think it replaces gold any time soon) It would not be unreasonable to have a 500 billion dollar market cap. That would put the price around 24k per Bitcoin. So it would not be unreasonable to see 30k bitcoin. 300k bitcoin, well that is a moon shot.

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