We are in a Bear Market For Bitcoin, and Volume is Abysmal, But that Doesn’t Mean There is No Hope
Bitcoin is still in a proper bear market, and have been since the height of January 2018. Meanwhile trading volume is declining. That isn’t a great combo, but there is a lot of reasons to remain hopeful.
How Do We Know 2018 is a Bear Market?
How do we know we are in a bear market? We know because:
- Prices are declining.
- Trading volume is declining.
- Each rally attempt is failing to reach the last high.
- RSI is moving from overbought to oversold on higher time frames (for example on the weekly and on average on the daily).
- Most of the price action is happening under key moving averages. For example the very important 12 and 26 on the dailies (see the above chart) and the 50, 100, and 200 (with many of the shorter term crossed under the longer term at this point; for example the 50 under the 100 and 200 and for much of the downtrend the 12 under the 26).
- And generally speaking you can draw a trend line from the height of the bubble to the current price and you get a downward slope.
Simply put, specific criteria aside, is hard to look at Bitcoin’s chart and not see a popped bubble that produced a bear market in 2018 that at best produced some failed rallies. Then of course, you look at crypto as a whole and see the same thing if not worse (most alts, but not all, are worse).
That said, this isn’t anything we haven’t seen before.
History Tells us Not to Stress and Instead to Strategize
After the rally of the summer of 2017 trading volume dropped significantly along with prices, altcoins (which had been having a rough go since early summer) took some big hits too.
Honestly, it looked like some coins could never recover and it looked like the crypto craze might be over (many felt foolish for buying the top: $5k Bitcoin, $100 Litecoins, $400 Etherem).
But we all know the story, crypto didn’t die, Jamie Dimon ate his words (at least for a moment), and we saw the biggest rally in recent crypto history. We saw $20k Bitcoin, $400 Litecoins, and $1,400 Ether (after Bitcoin outpaced everything and crushed altcoins down to very low prices in satoshis in between… that was also stressful).
Those epic price hikes we saw at the height of the 2017 – 2018 bubble didn’t come at us slowly, they came at us so fast that people struggled to open up exchange accounts and fund them quick enough to buy in. Those of us who entered positions lower (using our luck and/or skill) or who held through the sadness saw our balances rise while others scrambled.
You had only a few days to to buy Litecoin as it went from $100 – $400. You really had to be in before the “pump” or trading it began to require excessive amounts of skill from there forth. It was like that with most coins!
If history repeats, which so far it consistently has, then at some point we can expect this song and dance to play out again.
In other words, if you want to be on the rocket, you either have to be damn good, set up, and paying attention… or you have to figure out a way to get on before it takes off (and not get on too far in advance and thus miss the best prices)…. that is HARD.
Finding the Bottom
It is near impossible to find a perfect bottom, but finding anything close to the bottom is going to pay off handsomely. So let’s talk about what a bottom looks like using historic data.
- We see the bottom generally form at a historic support level ($6k triple bottom could be it, or it could be any support below that, no way to know).
- We see trading volume drop, but then come back with a vengeance once a rally begins (check on the volume drop, not so much on the ramp up… so far we have lots of failed rallies with no follow through… which by the way is what both accumulation and re-distribution look like).
- We see sentiment turn very bearish (hard check on that, the misery index is high right now).
- We see GBTC and Kimchi Premiums melt away (check, although there is more room to go here).
- We see the RSI get low on different time frames (check, check, and check all the way to the weekly).
- We see short term averages start to steady out and trend back toward long terms (no way to know yet, just barely started to steady).
- Right before lift off we tend to see alts rally quickly and Bitcoin attempt a rally (a great example is early April where alts and Bitcoin rallied, then Bitcoin fell back but alts didn’t, then they all rallied again).
- Right as we lift off we often hear good news like “finally a custody solution for institutional investors” or “funds with lockup periods have stopped selling” (you’ll hear good news like “Tokyo Whale stops selling” in the downtrend and bad news like “Ether might be a security” in the uptrend, but they will have no effect, despite this you will very likely hear good news around the time of the rally back from the bottom).
The more indicators like that that stack up, the more confident we can be that the bottom is found. Of course if you wait for too many to stack up, and say there is news that comes out that says something like “Coinbase partners with major bank to offer custody solution for retail and institutional investors; transactions settled in XRP” or whatever it is…. then you could be in that position where you are having to decide if you should buy after the $1.5k spike. I mean, you just passed up $6k, now you need to decide on $7.5k and the price is moving quick.
I don’t like being in that situation myself, so I’m going to average in, use stop buys, or generally have a very specific game plan. In general I like to average in in times like this… but of course if it is 2014 over again imma get rekt. So that means average in, but with cash on the side. If I have too much cash when it looks like the bottom is in, maybe I market buy there.
Exactly how you play this is up to you, but after a half year of bear market, where prices are essentially back where they started, and with some of those bottom indicators starting to show, I think its a good time to talk about what it looks like to go bottom fishing and play the contrarian… especially if you are believer in the blockchain.
I’ll leave you with a famous quote that I think plays well here, “it’s not dead, it’s resting“…. also, I’ll leave you with a quote someone made up and attributed to a Rothschild that I’ll butcher for the sake of crypto, “when there is blood on the streets, even if it is your own, welcome to crypto trading; you may want to see a doctor, but also… damn those prices are starting to look good.”