Recent predictions for Bitcoin have been calling for a price of 50K or higher over the next year, meanwhile Bitcoin is probing lower. Where are all the buyers? Is this market in a persistent bearish trend? Or are we still in a corrective consolidation? Many traders and investors aren’t able to differentiate between the two modes of market movement because they often focus on information that carries little to no relevance. In this brief video, I point out the most meaningful support/resistance levels and explain why current bearish price action does not carry the weight of a broader bearish trend.
Not Math, It's All About Psychology.
What is the problem here? Why does price go from squeeze mode back to slow and boring for weeks upon weeks it seems? What about all that exciting news that they keep pumping out on the big blogs and news outlets?
If you are getting all wrapped up in trying to explain Bitcoin behavior in a fundamental way (as most people do), all you are doing is accumulating fun facts that you can impress your developer friends with at your next cocktail party. Fundamentals are usually based on logic, while market valuations (particularly Bitcoin) are driven by the exact opposite.
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Bitcoin: How Do You Characterize This Price Action?
Key points to take away from this video are:
1. Trend is defined by your time frame of operation. It is possible to have smaller time frame bearish trends within broader bullish trends or consolidations simultaneously.
2.The entire price structure since the 14K peak established in June can be classified as a “corrective consolidation” also known as a Wave 2 within the framework of Elliott Wave theory.
3. The smaller the time frame, the less weight and the more random the information is. Don’t lose sight of the bigger picture and recognize the context of the current price location in Bitcoin. It is a potential higher low of a larger magnitude which is a sign of strength.
4. The potential profit target for a swing trade if a reversal pattern appears around the current location is in the mid to high 9Ks at minimum.
5. If price breaks beyond the 10,300 resistance, a larger magnitude Wave 3 can be in play which coincides well with the stock to flow pricing model (which says 50K+ after the reward halving in May of 2020).
6. Charts are an expression of order flow and order flow is a record of how participants express their perception of the future which does not have to be tied to logic (especially for markets like Bitcoin). Irrational behavior is why markets go from overbought to oversold and vice versa which has little to do with fundamental reasoning.
How Do You Interpret Your Charts?
In summary, perspective comes from comparing numerous but specific pieces of information. Since markets tend to be driven mostly by emotion, technical analysis lends itself well to gauging short term probabilities and market intent.
There is no need to get caught up in hype, drama, over exaggerated claims and other nonsense that this particular space is notorious for. Best practices are what shape our strategies and decisions both short term and long term and it is these habits that we hope to empower our community with.
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