🏰 BTC is KING! 🤴

in #cryptocurrency6 years ago

It sounds like a no-brainer, doesn't it?

That is to be expected when one calls the original cryptocurrency, the one worth more than the entire rest of the market combined "King".

But that's not what I'm talking about.

What am I talking about?

🏰 BTC is KING! 🤴

I'm old and forgetful, but things I read and write often linger in my brain for a looong time. This post is about such a case.

TA is tricky. It's always open to interpretation (as I intend to show soon with another BTC pattern-based, long-term price analysis post). An analyst should do everything possible to try to get the errors out of their TA and to make it as accurate and relevant as possible.

In the past I have lamented that most TA is poorly done. I also refrain from doing a lot of TA myself, being fully aware that people are over dependant on charts which are nothing more than educated guesswork, some less educated than others. I've written about this TA problem before, I'm not going to repeat that now. But I am going to build on it a bit...

14747592_7e7abc92cf_oh.jpg
From https://www.flickr.com/photos/roland/14747592 ; cropped by Bit Brain

A very long time ago (five months ago - it was my third STEEM post) I wrote about how it was difficult to determine what to base TA upon: the Total Market Cap of crypto or BTC price. This is what I wrote:

When forecasting the coming recovery (which I actually started a long time before I wrote that post yesterday), I was torn as to which chart to use: BTC or Total Market Cap. BTC has been the poster child for crypto and the dominant force for so long. Where BTC leads, the market follows. My charts yesterday used BTC (mainly because TradingView can’t show Total Market Cap), though I prefer to work with Total Market Cap. If Scenario C is correct and my prediction comes true, then BTC is no longer the dominant force that it once was. Total Market Cap predicted the support levels and double bottom far more accurately than BTC did. This is worth remembering going into the future. I believe that this stems from the massive rise of the altcoins in early January 2018.

It comes from this post. The post itself is a bad one and has not aged well at all! But in the interests of honesty and transparency, I believe in showing you the good and the bad. The fact is, I make mistakes too. Enough about that, we need to focus on that quote.

Ever since I wrote that, I have been watching the charts closely for signs that I was wrong or right. I had good reason to believe that Total Market Cap had overtaken BTC as the dominant indicator in the crypto market. BTC dropped in market share from almost 90% of the market in January 2017 to 2/3 of the market in December 2017 to below 1/3 of the market in January 2018. The effect of BTC had dwindled fast, the altcoins having showed that they were a force to be reckoned with. ICO mania hit in full force and Total Market Cap became the real indicator of what was really happening in the crypto world. Or did it?

Tonight I want to announce that the verdict is in: I was wrong.

After carefully watching the charts, especially the four main bottoms of the bearish periods this year, I am convinced that it is still BTC price and not Total Market Cap that is the dominant indicator in the crypto market today.

Coin line mini.png

What are the implications of this?

Using Total Market Cap

Well the first, and most obvious, is that BTC is the chart to follow. TA attempted on the Total Market Cap chart will be inaccurate - it is skewed by the rise and fall of BTC dominance and can not be considered an accurate prediction tool for the future of the market.

Sadly I have attempted a lot of my own TA on the Total Market Cap chart in the past - luckily most of it broad TA so it shouldn't matter too much. In fact: I've often complained that I don't have the Total Market Cap chart available in TradingView and so I just use BTC to approximate it. Turns out it's a good thing that TradingView didn't have that chart for me!

Luckily very few people use the Total Market Cap chart for TA - probably because it isn't freely available on analytical platforms. But...

Altcoin fiat pairs TA

More importantly, and I have mentioned this before: conducting TA on any fiat crypto pair (other than BTC) is an exercise in minor delusion. You're kidding yourself. In short: it is wrong to do it that way. So if you are carrying out TA on something like ETH/USD or EOS/USDT or LTC/KRW then you can't expect your TA to be accurate. Why not? Because you are conducting TA on derivative data: a combination of BTC price movement and BTC dominance. The more you use derivatives, the more you work in approximations and the less accurate you become. It's the same reason that I never use a Stoch RSI for any of my TA: it's a derivative function of a derivative function.

I know most analysts do this. "Most" does not equal "right" and I do not accept "sheep mentality" as a valid argument! Look, it isn't wrong to do it, it's just inaccurate and rather pointless. When you look at an e.g. STEEM/USD chart, you are not seeing the performance of STEEM. You are seeing the performance of BTC with a slight twist to it. That slight twist is the STEEM/BTC chart, the chart you should really be looking at! Is there any chance that I'm wrong about this? I'm afraid not. Still need proof? Here you go:

SPOT THE DIFFERENCE:Screenshot_3.png
... or continue to be sheep and follow the herd mentality. I've done my job by telling you, my conscience is clear.

So how should you do TA?

I'll make this very simple:

  • For BTC: TA as normal with fiat pairs. (Watch out for unusual market movements in fiat markets e.g. The BTC to Turkish Lira chart will give deceptive readings if you analyse the last week or so.)
  • For altcoins: TA using BTC pairs only (e.g. ETH/BTC, EOS\BTC , LTC\BTC).

The only exceptions I can think of are the small handful of altcoins pegged to some other asset/s of specific value. The best known example of this is USDT.

You can also check altcoin performance against one another e.g. when you bought into an ICO using ETH and you want to see if your tokens were a good investment or not - then maybe you look at something like CXO/ETH; or perhaps you want to check your GAS to NEO swaps with GAS/NEO. But for overall performance of a coin, reference it back to BTC.

The market movement for the rest of the year

I'm still happy with my current market predictions for 2018, now about two months old. What I have said above means that reaching a new 2018 ATL for Total Market Cap this week does not affect predictions. I still don't see BTC dropping much further. As I said in this post about BTC short-term price movement 3 days ago:

BTC bottomed out just below $6000. I am happy with that figure as it is in my target zone for the bottom of this wave. I was expecting about $5850, with $5750 as a worst case scenario, but that is close enough.

I will continue to stand by that for now, I see no reason to alter those figures.

Spin up the Superchargers!

It still holds true that altcoins can and probably will act as BTC "superchargers", amplifying its every move. That has certainly been true while the price has dropped. (If you haven't bought NEO after this terrible week, then I may have to give up on you.) When the bulls run again, make sure you are holding that which will perform best!

Caution: watch out for this possible scenario - BTC initially hurting the alts even further: https://steemit.com/cryptocurrency/@bitbrain/there-will-be-blood . Considering how much the altcoins have already dropped, I consider it unlikely that there is much room left for BTC to murder the alts again. They will probably act like the BTC superchargers they should. Probably.

Yours in crypto,
Bit Brain

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Every newcomer sees it as expensive. Just wait until the next few years when this thing flies. Long $BTC

Hey @bitbrain, while I agree that TA can seems futile on altcoin during a Bitcoin bear market there were times (spring 2017) where altcoins were completely decorrelated from Bitcoin and flying on their own, back then TA on alts had some utility. As far as only doing TA against the /BTC pair, I quite disagree, a winning trade should be measured in dollars, not in BTC, particularly when BTC is bearish. Just my 2 cent :)

Ha ha ha! You're one of those guys! Man I have had horrible fights with the altcoins/USD crowd in the past: "my BTC value is down, but I'm still up in USD" makes my skin crawl! 😂 I firmly believe in referencing all altcoins back to BTC, it's the only way you see whether you should have invested in alts or if you would have been better off in BTC.

For my own portfolio tracking: I work out my BTC value of the portfolio every day (which tells me if my alts were a good idea to invest in or not) and then I calculate the value of that in USD (which follows the market trends).

Thanks for your support today..hope to see you again!

Your posts look interesting. You get yourself a rare Bit Brain "Follow". 😎

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