Crypto Markets March 2018 - up or down?

 

Image from coinmarketcap.com

Short intro 

Hello everybody and welcome to my first post. Yes, I’m new to Steem and no, I’m not ancient in crypto terms either (just under a year).  But I’ve been trading stocks for a few years and I’m nobody’s fool. I’m very active in crypto and I believe that I can share beneficial information. I’m also pretty smart (and SO modest), so read on if you dare:  

Which way now, Up or Down? I don’t know. Nobody does. If you’ve come here looking for an easy answer then please leave now. But before you leave, I warn you; any definitive answer out there is just a guess. This market contains too much uncertainty and far too much volatility to make predictions with any degree of certainty. Having said that; there are two main scenarios that I consider to be viable. I’ll discuss them briefly and tell you which one I support and why.   

Scenario 1 – The traditional stock market hype curve 

The bubble has burst. Crypto is dropping. The hype of late 2017 has run out and the bulls have gone into hiding. You know the picture, you’ve all seen it. Supposedly we are in the “denial” or “panic” stage. My crude sketch below illustrates such a scenario.   

By now you have surely heard the phrase “Bitcoin is a bubble”. You’ve heard it compared to the dot-com bubble or to tulip mania. You’ve heard people say that we’re at the beginning of a long bear market. (This kind of thing: https://www.forbes.com/sites/chuckjones/2018/03/16/bitcoin-to-suffer-the-same-fate-as-other-bubbles/#3f9102b0ffb6 ). We call this FUD: Fear, Uncertainty and Doubt.  

Now those people might be right. They MIGHT be. If they are right then Bitcoin (and by extension the rest of the crypto market) will continue to fall. They speculate prices like $3000 or $1000, depending on whom you ask, and then predict a long period of sideways movement. 

Bitcoin could do this.  It’s done it before. Look at the chart below (thanks to coinmarketcap.com). That was Bitcoin from late 2013 to late 2015. 

So it CAN, happen and it HAS happened before. Theoretically these bears could be right, we may be in for a long crypto winter. Through anecdotal evidence, it is my experience that most people now believe this to be the case right now. 

But I don’t believe this.  I don’t care about FUD, not in the slightest.  Here’s what I think:   

Scenario 2 – Crypto is oversold and about to bounce back - hard 

My argument is based on basic Technical Analysis (TA).  I will try to keep away from the detail, because I know that many of you have no real interest in TA, and I don’t want to exclude you from the discussion. Here goes:

BTC is headed down to a support level. The pattern it is forming is a double-bottom “W” pattern [1]. A double-bottom is a support base from which (I believe) BTC will bounce up again. This TradingView graph shows what I mean: 

 

But that hardly proves anything, does it? Every day you’ll see a couple of amateur (or professional; there isn’t always much difference) charts thrown around, predicting a rise or a fall based on a particular pattern. What makes this one any different?  Why am I so confident when everyone else seems so glum? 

Because I look long-term. Very long-term if necessary.  Always remember in crypto: “If in doubt, just zoom out”** 

So we’ll zoom out a bit, and what we discover is that this support level has already been established, it first bounced off a similar level on 12 November 2017. The TradingView graph below illustrates this: 

I hope that makes you feel a little bit better about things and at least gives you hope that a rebound is possible, if not plausible. But wait, I’m not done yet.  “If in doubt, just zoom out.” 

Yes. That graph does start back in 2013. What you are seeing is a logarithmic plot of BTC price over the last four years (and a few months change). Note the long, curved trend line I have drawn in. It is THAT line that I am basing this on. It is THAT line that shows that BTC (and by extension the entire crypto market) is now oversold. It is THAT line that signals we are about to bounce back. And grow. And grow. And grow! 

The crypto market cap went way above that line late last year (Signalling a correction that had to come) and then crashed down in a mighty over-correction, a correction which I believe is about to end. 

Here is one last chart to give you a little more hope – this is the coinmarketcap.com chart of Total Market Cap (something I unfortunately can’t show using TradingView). It starts in January 2017 and essentially shows the same as the long term BTC chart above.  I didn’t run it any further back because it’s hard to imagine an accurate curved line in your mind (The line curves ove long periods, but can be considered straight for shorter ones).  Over the scale of a year imagining a straight trend line will do, and such a line shows just how oversold the market is right now. 

I know that TA is not the be all and end all of prediction tools. You can also look at Fundamental Analysis (FA) and maybe one or two other things. For instance, look at this tool that has just been developed, the Bitcoin Misery Index: https://www.cnbc.com/2018/03/09/wall-street-analyst-creates-new-index-that-says-when-to-buy-bitcoin.html . I think it’s a very good tool indeed! (Spoiler alert: It’s signalling a strong buy right now.)

Summing up: 

If you’re still negative and you’re determined to believe the current wave of “Bitcoin is dead, crypto is over” reported in the media, just remember that Bitcoin has already been declared dead 269 times [2] (and counting), yet somehow it is still here…  

Yes, Google has just banned crypto ads. Too bad. Think longer than 2 weeks from now, that doesn’t matter one bit. There is ALWAYS some negative press around, it really doesn’t matter, it’s all just FUD, and a wise investor* doesn’t care about FUD. (*Remember: short term traders SHOULD care about FUD, it’s their bread and butter. When I say “investor” I mean someone who has bought crypto for a long term hold). 

I could be wrong.  I could be completely wrong and this market crashes far beyond what I think it will. But crypto and the blockchain tech that it is built on WILL ultimately triumph, sooner or later, but that’s a story for another article…   

[1] See https://www.investopedia.com/terms/d/doublebottom.asp for more about the double-bottom. 

[2] See https://99bitcoins.com/bitcoinobituaries/ to see how many times Bitcoin has “died”. 

** I don’t know where the “in doubt, zoom out” quote originated. It wasn’t me. 

I hope you have enjoyed my first post and will consider following me for more to come. I have much more to share with you! 

DISCLAIMER: 

I am not a financial advisor nor am I a professional trader/investor. This is not financial advice, investment advice or trading advice. Unless otherwise stated, all my posts are my opinion and nothing more. Crypto is highly volatile and you can easily lose everything in crypto. You invest at your own risk!  Information I post may be erroneous or construed as being misleading. I will not be held responsible for anything which is incorrect, missing, out-of-date or fabricated. Any information you use is done so at your own risk. Always Do Your Own Research (DYOR) and realise that you and you alone are responsible for your crypto portfolio and whatever happens to it.