How to Understand the Market With Bitcoin Between $9k and $10k
Bitcoin broke the $9k barrier. We discuss some things to watch for based on historic trends and the current market with Bitcoin between $9k – $12k.
TIP: This article originally covered $9k – $10k, thing is the same logic applies to whatever high we hit. So let’s call that $12k for now. I’ve updated the article a bit and annotated a few parts [annotations in brackets] to reflect the current state of things [the state being currently at about $10.75k, but had been up to about $11.5k].
IMPORTANT: Below we will discuss some potential moves in the current market. However, this article is not meant as investing advice. It is simply an attempt to examine possible scenarios in the current market based on broad historic trends. You should use the information on this page as a springboard for research and thought, not as a call to action. Every single thing noted above could end up not happening. Expect the unexpected.
Here are some key concepts to keep in mind for the current market:
- It isn’t unreasonable to think there could be another rally. Nothing says Bitcoin has to stop at $10k or retract past $8k [it didn’t]. For all we know we’ll see prices beyond anyone’s expectations sooner than expected [that was the case]. Same goes for major alts. No one knows the future, and looking at charts and historic trends only help so much.
- There is one scenario where all crypto goes up and everyone who holds is rewarded [that happened at first, then Bitcoin took the lead]. This has happened before, there is no reason to dismiss this scenario. With that said, the following points should also be considered.
- Sometimes when Bitcoin’s price increases quickly (like it has this week), it lifts the prices of altcoins [this was the case at first]. However, just as often a quick price increase suppresses alts (while people pile out of altcoins and into Bitcoin) [this is what happened shortly after Bitcoin starting going up past $10k]. As an additional consideration for those investing in alts, if Bitcoin enters a correction period it has a chance to take most alts down with it. This presents a few scenarios for alts in the short term that aren’t ideal (this doesn’t speak to long term trends and this doesn’t speak to what must happen… only what has historically).
- After long runs (especially in a market with new buyers), Bitcoin tends to be in danger of entering a correction period (as those new buyers are less likely to hold and existing holders are more likely to take profits). Thus, there is reason to be a bit wary given the recovery from $5.5k to nearing almost $10k within two weeks [we haven’t seen a big correction yet, but we have seen some wild swings and downward pressure on the market with each move up; a correction to $7.5 – $9.5k wouldn’t be out of the question if $10k can’t hold, what happens is anyone’s guess though].
- Bitcoin and to some extent Bitcoin Gold have had an inverse relationship with Bitcoin recently (when Bitcoin goes up, they go down, when Bitcoin goes down, they go up) [this remained true in this period, Bitcoin Cash and Bitcoin Gold were lackluster coins during Bitcoin’s rise]. That means they could work well as a hedge against Bitcoin going down, but given Bitcoin’s bullish trend they could very well result in losses for the time being. Before you hedge in Bitcoin Cash, or go all in on Bitcoin or Bitcoin Cash, realize that there has been a war of sorts going on between these two coins (that adds in a complex range of factors to consider). TIP: The inverse relationship does not have to persist, it is not written in stone. It is possible that both coins do well or both, conversely, do not do well in the short term.
- Generally, the market is a little volatile and uncertain right now due to all the new adoption and recent price movements. Thus, taking some profits in fiat is a safe move (although it is a move that almost ensures missing out on some epic gains) [thus far a conservative strategy, that is taking profits between $9k – $10k has been a decent one; like I originally said, you did miss gains, however you are also now in a good place in case we see a correction… investing is largely about protecting your capital, plus if you kept some Bitcoins and alts coins you were long on, you likely did well all around].
To make a long story short, the bottom line here is:
- After Bitcoin’s recent epic run, after the epic run of alts, and after all the tension between Bitcoin and Bitcoin Cash we are in a market in which anything could happen (and happen quickly).
- Regardless of what happens, history suggests that there is potential that alts will be suppressed while either Bitcoin or Bitcoin Cash (and to some extent Bitcoin Gold) will do well.
- However, to the the point of uncertainty, things are uncertain and thus one shouldn’t expect any set of events to play out as a given.
- Lastly, in uncertain times there is a ton of money to be made making smart and quick trades between coins. This is risky, but timing it right can offer great rewards.
With all that in mind then, the above means that while some will be generously rewarded for taking chances and making risky bets, it could be a good time to be conservative, take some profits in fiat (while still holding some of your favorite coins), and exercise caution (it really depends on your personal strategy and tastes).
You should ask yourself, “how much am I willing to risk on the coins of my choice?” If you are willing to ride out a substantial downturn in any coin for long term rewards, then there are less considerations.
If you are going to be more upset by a downturn than you would be upset by missing gains, then think about playing things conservatively.
If you are somewhere in the middle, then create a strategy that plays all sides and hedges against some of the worst cases noted above.
The crypto market is generally volatile and hard to predict in general, that of course is even more the case at times like this. Thus, there is wisdom in living to fight another day and letting other traders duke it out.
For those who don’t care about the day-to-day, by all means put your crypto in a wallet and walk away.
However, for those considering entering the market or for those who aren’t ready to hold through some turbulence, keep in mind the conservative move to fiat with some of your stack, hedging Bitcoin against Bitcoin Cash, trying to make favorable trades between Bitcoin Cash and Bitcoin (or between other coins) through the volatility, and even buying alts with Bitcoin while those trades are favorable are all options (and each has its potential risks and rewards).
TIP: When everyone panics and sells or buys, it can just lead to more volatility. It is generally a good idea to decide what you want to do and then do it methodically and incrementally. Using limit orders and stops can really help to take the emotions out of things (it avoids you doing spur of the moment market orders).
NOTES: The price disparity between different exchanges is a little bizarre today. Bitcoin generally trades for very similar amounts of most exchanges, but that hasn’t been the case in the past 12 or so hours. It is likely that a new wave of adoption spurred by traders going home for Thanksgiving in the U.S. and telling their Bitcoin stories caused the recent spike (that would explain why Coinbase/GDAX led the pack). That is a good thing, more adoption means a higher market cap and more volume. Still, this truth isn’t all good news. New buyers are generally a little less resilient and this could contribute to volatility in the market (especially if Bitcoin prices start dipping below $8k).
THOUGHTS: Fingers crossed all coins lift each other up and everyone makes money. This could happen and it for me is the ideal case. There is every reason to be confident in the future of crypto given the rapid growth of adopters and the current market cap of the crypto market vs. the market cap of some widely traded stocks. If you understand the risks, then there is a lot of good times to be had. However, if you are going into this blind, realize that we are in somewhat uncertain times for a moment due to all the factors noted above. Remember though, there has rarely been a case in history so far where the top coins reached heights that don’t surpass in the following weeks or months. That doesn’t mean this will happen this time, it only means that “so far, generally so good… despite the bumpy road.”