Will Bitcoin Ascend the Mountain, or Will it Succumb to Capitulation? The Point here: It is Still Unclear.
Bitcoin is slowly making its way through some key resistance levels in the $10ks, and things look hopeful but we aren’t out of the woods just yet. Here are some considerations. NOTE: These are considerations, for educational and informational purposes; this is not investment advice.
First, check out this excellent Bitcoin analysis. Some mastermind on TradingView turned Bitcoin’s price chart into a Lord of the Rings style choose your own adventure game. That is a little “corny,” but it also allows us a fun way to talk about Bitcoin.
When I say, “things are hopeful,” and, “we aren’t out of the woods,” not only do I mean we are making our way out of murky territory and toward breaking through some key resistance levels as some rather bullish patterns are forming on Bitcoin’s chart (like an inverted head and shoulders)… I also am referencing this chart on TradingView (click it and see the chart).
Ok, so half-joking aside, here are some things to think about as we make our way out of the woods (either toward a bullish new hope, or toward bearish anger, despair, and capitulation).
- If Bitcoin breaks through key resistance levels and keeps making bullish waves back toward other key levels (very roughly $13k, $15k, and the $20k-ish all time high) it has a real chance of suppressing altcoins rather than taking them with it. As when Bitcoin goes up quickly, money tends to flow out of all other coins and into Bitcoin. Thus, even a Bitcoin bull run can be depressing if you have too much exposure to altcoins (at least looking at BTC prices, fiat prices should hold up decently or even be lifted at a decelerated rate). Meanwhile, if Bitcoin makes headway slowly, there is a good chance it’ll give alts time to catch up as it climbs (which is likely the best case for the average crypto investor).
- If Bitcoin moves too quickly after breaking upward, it has a chance of being on shaky ground (and thus the whole crypto market might be on shaky ground). We saw this back in December when Bitcoin went on its epic run from $5.5k to $19k, it went up quickly but dipped fast and hard more than once on its way. Then it didn’t spend much time at that high. Then a pretty wicked correction followed about a month later. Even in the rather volatile cryptocurrency space, big moves have to be earned. Giant and quick victories tend to be temporary.
- If Bitcoin fails to break resistance levels, and it fails hard enough (like down to the $8ks), we then have a setup for further correction (potentially down below the last low of $6k-ish). It is tempting to see where we are at right now as “recovery.” However, we are more on the precipice of a recovery after a correction (again, in terms of the chart above, we are at the edge of the hoping hills, but still in the forest). That means those holding Bitcoin right now, or those buying, might have to stomach a loss or make difficult choices if the upward trend is not confirmed and Bitcoin turns bearish (even in the short term). This is the nature of the woods. Things aren’t clear, so choices made are going to be more complex.
- Those who want to make their lives simple may consider waiting for a clear Bitcoin breakout or a clear failure to breakout (at least before taking aggressive positions). Right now we have a lot of short-term moving averages sitting on top of long-term averages. I can’t go into everything that means, but it is another clue that we are in an unclear space right now. An upward breakout means some bullish patterns have formed like the inverted head and shoulders noted above. A failure is more complex; it doesn’t specifically spell doom, but it requires a complex analysis and number crunching. It isn’t a bad move to wait until things become clearer.
- Given the above, those who are “all-in” crypto should think hard about their positions. If you are all in alts, you are taking an additional risk. As Bitcoin going up or down can hurt your alts, and only Bitcoin is stagnating or going up slowly is likely to help you in the short-term (in the long-term a good alt is a good alt and could perform very well). Meanwhile, in terms of Bitcoin, if you decide to hold now and things go south, your choices are likely to become complicated again at the next support level Bitcoin finds below this (meaning you’ll be faced with the same “sell or HODL” problem, but with less valuable Bitcoin).
Bottomline, if you believe in crypto, then you probably think crypto is fundamentally a good investment. From that frame, you want exposure to the cryptos you believe in. There have been much worse times to have exposure, but there have been better times as well.
We are at an exciting point here, but things are rather unclear. Overly bullish moves and overly bearish moves (like shorting Bitcoin) made now have an air of gambling and speculation about them.
If you are going to take a large bet on the hero of the story above, its a safer bet to wait until he is out of the woods and on a clear path up the mountain. If you have been betting on him all along, there is reason to be hopeful and not give up. However, you should be aware that there is a good chance the hero will be soloing the mountain if it goes that way, so you have to think extra hard about betting on his sidekicks (like his faithful doge).
There is a possible world where all coins do well. There is a possible world where no coins do well. There are lots of worlds in-between that are more moderate or see only Bitcoin doing well. There are lots of forks in the road here and that is what makes things uncertain.
The future is likely to present us with a less complex path to follow, so there is logic in waiting for that.
Meanwhile, if you want to be on the journey now, take time to think about how you will react if a given set of events plays out and make sure you have a strategy that involves something you feel comfortable with.
HODLing down to $4k – $5k in a bearish case isn’t likely something anyone would feel comfortable with. Thus, make sure you have a strategy that prevents you from riding your life savings into the ground. No one in the top cryptos is broke right now (although some people in alts have taken heavy losses). From this frame, there is plenty of room to make smart choices based on data and strategy from here out. If you are in cash, the smart choice is entering the market cautiously and waiting for a clear sign. If you are in crypto with profits, the smart choice is likely having a plan to secure profits if things start to look grim. If you are in crypto with losses, your focus should be on preserving the capital you have and learning a lesson so it doesn’t happen again.
BOTTOMLINE: Everyone has to make their own choices on their crypto journey. But it is easier to make choices when you have a sense of where we are. Where we are at is stuck in the woods between bull mountain and bear valley. Pack accordingly.