The Character of Bitcoin Has Changed, But Read More to Find Out the Opportunity!

bullishmoney (63)in #strategy • 8 years ago

Although it has been a paradigm-altering investment, bitcoin over the past one-and-a-half months has been a source of much frustration. Every time bitcoin appears to gain some traction, it gets cut down from pessimistic trading.

This lack of momentum has concerned many people who are new to the cryptocurrency investing game. With the bitcoin price having hit five-digits, mainstream investors reckon that it's better to seek the perceived "protection" of the traditional equity markets.

Empirically speaking, bitcoin's character has changed. However, this doesn't necessarily mean a permanent change, nor a negative one.

Bitcoin Price Sentiment Indicator

Take a look at my bitcoin price sentiment indicator, which displays trading activity across the price spectrum, from $70 to $20,000:

Immediately, you can tell that there are more bullish trading activities than there are bearish. This is true at the lower price range, as well as in the past month -- ordinarily, you wouldn't think that given the volatility!

But what makes the current consolidation phase so frustrating for investors is that the bull/bear ratio is much lower now than it was in prior price points.

For instance, between the $80 to $8,000 range, the bull/bear ratio is 63.4% (I calculated this using data from Coinmarketcap.com). But from beyond $8,000, the bull/bear ratio fell to 26.6%.

That tells me that those bears who dropped the price carried significantly more leverage. Yes, bulls have always overwhelmed bears in number, but not necessarily in absolute strength.

Thus, the bears win..for now.

Here's the Bitcoin Opportunity

The other reason why bitcoin prices fell was due to newcomer panic. When the powerful bears exited their positions, the Johnny-come-latelys didn't want to hold the bag, and thus, cut their losses.

That's a bad move because now, the bitcoin price is more or less in equilibrium, or what technical analysts call a consolidation phase. This means that bulls and bears are relatively fighting with equal strength.

But as more bulls recognize that the current price range of $10,000 to $11,000 is holding up well, we should see a net increase in volume and participation. I'm betting that bitcoin will enjoy a robust rally soon.