Crypto spent most of 2018 in a bear market. Unfortunately, 2019 has not been much different. We are still in a downtrend.
What I mean is 1. Bitcoin (BTC) is in a long term downtrend, and 2. the total market cap of all crypto (TOTAL) is in a long term downtrend.
I don’t mean that there are no coins doing well, in fact many alts are showing amazing strength against BTC here!
Also, I don’t mean anything negative about crypto really. I’m 110% a crypto fan and am aiming to accumulate coins.
Honestly, I want to see bull markets and bottoms.
Bottoms to accumulate safely, bull markets to profit from the accumulation and bring more interest to crypto.
People come for the price increases, stay for the Daaps, DLTs, and crypto-as-money… and the result is people use my site… and everyone is happy (but especially I am happy).
Still, what I want and what I see are two different things.
And what I see is that we are clearly still in a downtrend looking at the BTC and TOTAL charts.
Let’s look at the TOTAL chart as an example (i.e. we are looking at a representation of the total value of the crypto market cap as measured by the symbol TOTAL on TradingView).
See that chart above:
- See how the first part on the way up, the price action (i.e. those little red and green bars called candles), is above the squiggly lines (a measure of price action over time called moving averages)? That is what an uptrend looks like. You buy the dips in this market, you HODL, and it is glorious.
- Now, see how on the second part the opposite is true, the price action is almost trapped beneath those lines? Well, that is what a downtrend looks like. You sell the rips in this market, and you stay in cash or short the market most of the time, and it is depressing for the majority.
- Now see those straight lines I drew, those are trendlines (there are different ways to draw them, think of these as one of many ways to illustrate the range the downtrend has been trading in).
In very simple terms, the price has been trading under those squiggly lines for a year, and just went ahead and did it again this last time, and that means we can safely call this a downtrend.
And, until we break out of the downtrend and back into an uptrend, crypto (both BTC and total market cap) are likely to trade in a range with the ultimate trajectory being down.
That means roughly they will trade between the straight lines, dropping each time they make their way toward the squiggly lines.
A trader would tell you “the trend is your friend.”
Thus a trader who believes there is more pain ahead might buy toward the bottom of the range (or on a show of strength within the range), and then sell toward the top of the range or when the price starts flirting with the squiggly lines.
This sort of thing doesn’t take all that much of a time commitment if you focus on daily charts and higher. That said, the same logic applies to lower time frames too. If you see the price dipping onto the squiggles on the 15 min, or sitting on top of it, you should know the direction of the price unless there is an upset.
That really is all there is to trading and charts from one perspective, and from that perspective things like EW and Fibs are just icing on that cake.
Now, that covered, for those who are looking for hope or want to buy for the long term, the same facts apply, but there would be no point in following this theoretical trader or thinking about their smug shorts and cash bundles.
For those who want to buy long and don’t care for details, life is as easy as hitting the buy button and not looking back.
For those who want to try to time the market, but want to be invested long term and don’t want to trade much or at all, one might simply apply the same reasoning, but aim to buy toward the bottom of the trend lines and not toward the top as the price action is flirting with touching those squiggly lines.
A position built just from entries at the bottom of the trendlines is going to net you a waaaaaay better price than one built at the top. In the short term, in the bear, you’ll underperform a good trader… but if we get another bull, you could end up out preforming the majority. It really isn’t an illogical way to play the bear if you aren’t super skilled or don’t want this to become a major time sink.
Look, one day, and maybe it isn’t too far away we will breach the squiggly lines and trade on top of them, and that will be glorious… but for now…. crypto is respecting the rules of a downtrend… and, if you acknowledge that, the crypto world becomes a lot less confusing.
That is all 🙂