Do you know why Technical Analysis works?

Why are Elliott waves so regular in shape? Why do we get "market cycles"? Why do Fibonacci levels provide strong support and resistance? Why does a tapering Bollinger band or triangle signal a breakout? The head-and-shoulders, the triple top, the teacup and handle (to name but a few) - they all work! No, not every time, but they're fairly reliable. Why is that?

Because of Bit Brain's Fourth Law of Crypto: Technical Analysis is a graphical representation of market psychology. It is a way to visualise the feelings of masses of people wrt trading. It works because people have a herd mentality i.e. they follow each other like sheep. Like it or not, it's true.

The insanity of bearish expectations

I have written before about how the average trader thinks. The article is truly excellent - one of my best (if I do say so myself), so read it if you have not already done so. It's rather relevant to this post: https://steemit.com/cryptocurrency/@bitbrain/i-m-realistic-about-the-crypto-market-you-aren-t That article was rather detailed, so I will try to keep this short, bearing in mind that you can go back to that previous post and it will fill in the blanks for you.

To quote @pandorasbox from her comment on my post of yesterday: "as long as there are people 'waiting on the bottom to buy' i don't think we're there."
She's absolutely right. Doing a metadata analysis of all the posts I see lately, all the articles, all the investor group comments - one common thread shows up in all these places: "I think the bottom is near but I don't think we've quite reached it yet. I'm waiting for BTC to drop to the $5800/$4750/$2000 (pick a number) support level before I buy."

GIANT ROCKET-DRIVEN DOUBLE FACEPALM!

From https://en.wikipedia.org/wiki/File:Frustrated_man_at_a_desk_(cropped).jpg ; licensed under https://creativecommons.org/licenses/by-sa/3.0/legalcode

So nobody is buying because everybody is waiting for everybody else! On top of that, they're all still pessimistic, walking around with their bottom lips trailing on the floor because their crypto portfolios have done so poorly in 2018. They're pessimistic because they were over-optimistic late last year. And what does optimism mean? As I said in that awesome post of mine which I already referenced earlier:

"Here is the worst thing about being an optimist: optimists are only ever disappointed. If you are always expecting a best-case scenario, how can you ever be pleasantly surprised? What you can be is bitterly disappointed!"

That was before I explained, in detail, how their optimism turned to disappointment and depression when their rose-tinted world was ripped apart and came crashing down.

So here I am, surrounded by a world of depressed former-optimists who are now too afraid to turn bullish "just in case the market drops further". And because so many of them feel this way the golden rule of the markets kicks in:

"Market psychology 101: a market does whatever people expect it to do."

Their pessimistic attitude becomes a self-fulfilling prophecy and we go nowhere. Herd mentality at its finest. Chances are that you are a part of this problem. Most of you have to be, the daily trading volume doesn't vanish by itself!

I've done my best to keep buying. As I said yesterday, I've bought the major dips three times now, for me this was a golden opportunity and I'm not one to look a gift horse in the mouth. But I'm out of money now and I can't keep a market afloat on my own! Until you, the herd, get real about your market expectations and start buying instead of waiting for ridiculous dips, crypto is dead in the water.

To those of you who are buying, or are at least in a hodl - well done! You guys are what crypto needs. You're trying to make a difference. You realise this is not just a financial commodity, it's a technology, a revolution, the future. You get it!

To the rest of you sheep: kindly wake up now! BTC has dropped from $20000 to $6000 and you want it to drop MORE? Was a 70% drop not enough for you? What are you waiting for, 90%? Look at the history of BTC price drops for crying out loud! You're being completely unrealistic!

Do you know what the scariest thing is?

The scariest thing is that I'm not saying that there won't be a continued bear market. As long as the herd mentality remains, a mentality which tells itself "I'm waiting for the price to drop lower", the market can not move upwards. If volume plummets even further then the sheep mentality may just cause the bottom to fall out of the market AGAIN! No thanks to that! 😡 (I don't see this happening, but it's not impossible!)

On the plus side, thanks to the sheep again, once the buying finally gets going then it's really going to fly! There are so many fundamental reasons why this market is just primed to shoot upwards! Sell walls will melt away like a mosquito in front of a blowtorch.

And then the cycle will repeat again.... (Though hopefully at a higher price level and without such a severe drop next time.)

Sheep...

Yours in crypto,
Bit Brain

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Published on

by Bit Brain

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