The Bear Market Officially Over?
Is the Bear Market Officially Over?
The past month has been exciting for the crypto markets. Bitcoin rallied nearly 50% from $6,500 to $9,700 and many of the altcoins increased more than 100% from the lows. Some projects such as EOS and Ontology we up over 200% in just one month!
However, many remain skeptical that the bear market is over and are looking for prices to go back below $6,000. Some are even calling for $3,000 Bitcoin. The correction was severe and after several short-lived rallies, I can understand why many remain cautious.
Signs of a Bottom
I have been taking a contrarian point of view over the past two months and began to anticipate the signs that would mark the low.
These were the signs I was looking for:
Climactic selling to mark a capitulation bottom or a new accumulation period
Extremely oversold conditions on most charts
Prices to get back above the downtrend on the daily chart
Altcoins to bottom first before Bitcoin confirmed a bottom
Extremely bearish sentiment in the crypto community after a big correction
All of these have played out.
No Long-term Bear Market
It was widely expected that the crypto markets would experience an extended corrective cycle similar to the one in 2014 & 2015. In my Video explaining why Bitcoin would bottom in April, I argued that we were not repeating a similar cycle to that seen in 2014 but were in fact repeating a similar correction seen in 2013 and that it would be followed by another big run to new highs.
The video is linked below:
To be fair, the ecosystem has completely changed and comparing 2018 Bitcoin to 2014 Bitcoin is challenging because the dynamics that drove the first bear market differ significantly to the drivers of this latest sell off. Today’s crypto ecosystem is more mature and orders of magnitude larger from a market cap perspective.
Additionally, there was the added pressure of tax selling as traders and investors were liquidating to raise capital for tax bills from the 2017 gains. Many believed this would pressure would subside going into April. We also learned of the Mt. Gox Trustee selling large blocks of Bitcoin & Bitcoin Cash during the first quarter of the year. While the selling has ended for now, they will sell more eventually so that potential supply is still there.
Institutional Investors
Big money from institutional investors will drive the next wave. In recent weeks, we have seen several influential investors also calling for a bottom in the market. Most notably, Pantera Capital Management has called the bottom and expects to see new highs this year. In a recent letter they stated, ‘Today’s a great day to get long. I rarely have such strong conviction on timing. A wall of institutional money will drive the markets much higher.’ The full letter can be found here: https://nodeinvestor.us15.list-manage.com/track/click?u=6f8949842c816a78ea94026e3&id=86c8f78f40&e=a034975b15
During a recent CNBC interview, Tom Lee, Fundstrat’s co-founder and head of research, predicted that the cryptocurrency rally would continue and that the Bitcoin price could trade as high as $25,000 this year. Watch the interview here: https://nodeinvestor.us15.list-manage.com/track/click?u=6f8949842c816a78ea94026e3&id=6aa6fdcbec&e=a034975b15.
We’ve also learned that prominent hedge funds and family offices are enter the space. The Soros and Rockefeller funds for example. Traditional stock and commodity exchanges around the world are also moving towards cryptocurrency trading and just this week the NASDAQ CEO stated, "I believe that digital currencies will continue to persist...it's just a matter of how long it will take for that space to mature."
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Technical Analysis
Finally, let’s take a look at the charts. First taking a big picture view with the weekly chart of Bitcoin. After correcting 70% from the highs, Bitcoin found a low in February and was followed by a strong rally to $11,600.
We then saw several more weeks of selling which re-tested the lows and is now forming an Adam/Eve Double Bottom pattern. However, it's important to note that this double bottom pattern will not be confirmed until prices are back above $12,000.
The RSI on the weekly chart has stayed above the 40 mark which is bullish sign if this market is to continue higher.
On the daily chart, the long-term downtrend line was finally broken when prices moved above 8700. The volume at the February lows was also indicative of capitulation and this type of climactic selling often marks the absolute low. We then saw a period of accumulation around $6,500 before prices move up over $1,000 in just one hour creating a massive short squeeze.
It’s important to note that while Bitcoin was consolidating around $6,500, the altcoin market had already bottomed and many names were already up significantly from the lows. When Bitcoin confirmed, this added fuel to the fire and the rally continued for a couple of more weeks.
We have seen the rally across the board and not just in a few names. The breadth of the recovery has been impressive and many names are up over 100% from the lows. You don’t see that type of action in bear markets.
I Am Bullish
The markets reached extremely pessimistic sentiment in March and I issued a “Crypto is Not Dead” newsletter in response to the negative media I was reading. A few weeks later, I posted a video explaining why I thought Bitcoin would bottom in April and go to new highs this year. As expected, there were plenty of negative responses to these but many of you were also spotting the bottom and buying at the lows.
It was my personal belief that prices would be higher when looking out 6 months, 9 months or 1 year. Sure, prices could have seen a short-term spike lower but I didn’t want to wait for it and began scaling back in. Over the past two months, I have increased my long term holds again and shifted my portfolio from a Bitcoin-heavy weighting into an Altcoin-heavy weighting. My top category for 2018 is the platform projects.
The markets will continue to ebb and flow along the way. After a strong few weeks it would be normal to see some pullback here but I remain bullish and believe the low is in. Until the prices say otherwise, I’ll continue to bet on the trend and look for dips and opportunities to increase my positions.
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