cryptocurrency at 2019

Bitcoin’s valuation being $6,000 was an important level to many people in the crypto space. Miners, ICOs and crypto hedge funds alike all relied on the price to stabilize at that level. When that resistance level broke, many things changed for the market environment.

What happened at $6,000?

Bitcoin (BTC) traded sideways at around $6,000 for a very long time. This was mainly due to the fact that so many different people and organizations relied on the price to stay at that level in order to stay in good profit. As a result, the general consensus of the market environment when the price fell pretty much became “Well I guess it’s time to leave, guess I’ll get out as fast as possible!”

At the end of the day, if you need to call it quits, you really have no say. Just sell. If you have bills due and you’re in debt, sell your trading assets and pay your bills. Imagine how this would feel as a company that needed to ‘call it quits’.

A fund usually comes with a 12 month holding period. As a result, any crypto hedge funds that started between October 2017 and February 2017 are pretty much in the dirt now. Many of these funds were holding Bitcoin and high supply cap altcoins, as well as ICO. Remember, at the time, ICOs were what everyone was promoting.

Since then, a lot of those ICOs have produced no gains, and some haven’t even released their coins yet.

The Opportunists Are Going Extinct

With the sentiment of panic and depression consuming the market environment, imagine a fund that was forced to liquidate $50 Million in Bitcoin.

Oh and don’t forget the ICOs that will need to liquidate their Ethereum (ETH) and Bitcoin (BTC) in order to fund the development of their project or face collapse.

Oh and also the large mining pools all over the world (Mainly Europe and the USA) that are beginning to mine at a loss.

For short term players, this is a nuclear bomb, and everyone witnessed it go off. Any opportunists that joined the crypto space for profit alone. The biggest losers are the ones that joined with borrowed money. All of these people have been metaphorically flushed out by the current market environment.

The sad part about this, however, is the number of long term investors and traders alike that bet big, overextending themselves and putting their necks on the line. Many of these players would have been amazing additions to the crypto space, but as stated above; when you need to call it quits, you have no say, get out.

If you’re reading this, you’re most likely thinking of becoming a long term trader (otherwise you’d have called it quits also). If you’re planning on making a long term investment, you have to think about the future. In this market environment, I feel as though there are 2 separate main groups of participants. These are Investors and traders (small time), and Large scale institutions and miners.

2 Differing Forces

I believe these two different groups while they are in some ways fighting for the same cause, they are completely different. They have different expectations, different experiences, and different pain thresholds. Currently, the emotional market cycle is somewhat out of sync between the two groups. Thus, many of the ‘weak hands’ in the crypto space have been shaken. I think most of them capitulated during the drop down to $6,000, and anyone remaining is most likely in the anger stage.

All of the larger fish (Mining Pools, ICOs, institutional investors etc) have been capitulating for the past month or so. Eventually, they too will fall into the anger stage. In the meantime, the small scale traders and investors will enter the depression stage.

wall streat cheat sheet

Something that may be important to note is the fact that the majority of price movement is seen during the capitulation and anger stages of the market environment. None of this happens during the ‘depression stage’. After all, the depression stage is determined by the depression felt by those who have already lost, not those that are currently losing.

As a result, this gives power to anyone that had the wherewithal to act proactively instead of re-actively, and to anyone with the emotional fortitude to act in confidence while the majority of the market is emotionally distraught.

The Current Market Environment

There are 2 different states of the market. For the Bulls:

  • The weekly Relative Strength Index (RSI) is currently at the exact same level it has previously been on during late 2014 at the end of the Bear market.
  • The price bounced off of the moving average of 200.
  • Both the RSI and Stochastic on the monthly chart are at the same level as they were previously during the bottom of the last bear market environment.
  • Currently, everyone is crying for a $1000 Bitcoin. However, these cries have been getting increasingly quieter over the last few weeks.
  • Total retrace = 83%. This is very similar to 2014, where to total retrace was 85%.

For the bears:

  • This bear market is very different from the previous ones. As a result, it will most likely last a lot longer, and be a lot more brutal.
  • Think of the entire history of Bitcoin as one huge bull market, rather than two bull markets and 2 bear markets.
  • This factor alone is what justifies the case for a larger retrace, as well as a more prolonged retrace as the bottom was not at ~$1,000 but actually at $0.

What Are You Going To Do in 2019?

If 2018 taught you anything, it’s that it’s crucial to only risk the money you’re willing to use. From there, only invest your money in a way that still has you feeling comfortable. There is a level of stress and mental strain that comes with investing money outside of your comfort zone. This often ends badly.

Personally, I believe that Bitcoin (BTC) and cryptocurrency, in general, are long term assets. I believe in the future of bitcoin. If you’ve been following cryptocurrency for more than just the price, we have all seen this before. Though, that doesn’t necessarily mean that the cycle is inevitable and will repeat. For all anyone knows, Bitcoin could hit 0 this time.

Regardless, I see Bitcoin hitting $3,000 or even $1,600 as clear long term buys, but that doesn’t mean Bitcoin can’t go to $0. All it means is it’s another risk/reward asset that I will be investing in.

At times like this when the market is hurting and everyone is in disarray, that’s when I invest. Big difference to trading. I buy cheap and only begin trading when the market environment becomes inflated and volatile.

A trading mistake I made last year was to mismatch my investing principles. For some wild reason, I decided to create a ‘core portfolio’ made up of altcoins. This would’ve been a fine decision had I not made it after my initial investments.

These initial early purchases were investments, great investments in fact. My following round of ‘investments’ were in fact speculations. This secondary collection of altcoins was the main reason for many of the losses I faced during 2018, despite cutting the losses somewhat early compared to where the market is now. If you buy an asset at $5 then ‘invest’ at $50 you’re speculating. Simple.

Going Forwards

Right now, there are two competing risks;

  • The further risk of a loss
  • The risk of missing out on a great opportunity

In order to develop your own personal plan, you will need to balance these two competing risks. This personal plan will be something you feel comfortable with and are able to stick to. Many traders have their own, finding yours is key.

The Trade

Load up between where we are now, and $3,000 but still use a stop loss. This stop loss would need to be larger than you would usually make it, and use a wider stop. If you’re only setting low buys and the prices fall all the way down, congratulations you got a tight stop. However, you risk BTC not hitting your low buys. Thus, a total account risk larger than 2% would be a great implementation for this method otherwise you risk missing out. Usually, this leads to FOMO and causes people to buy in at bitcoin while the price is high. Bad idea.

One of the main issues with this method is that you’ll still need to decide upon your re-entry strategy. This can be extremely difficult. On the way up to 20k, Bitcoin spent a lot of time between $2k – $3k meaning BTC potentially has multiple support zones. In that light, yes, technically you could wait until bitcoin goes below $2k.

But if it doesn’t go down that far, what do you do? The current market environment is grey, and its hard to tell where exactly we could go from here. For all we know, this could be a period used to rope traders into losing more than 10% of their portfolio.

A High Reward Investment

This option involves thinking on a long term basis. You will determine this plan based on your confidence in Bitcoin while the price is between $2k and $3k. This option often involves committing to re-invest if you’re wrong. When buying all the way from here all the way to $2,900 then scaling that into 1x leveraged positions, you are ensuring that you will receive good profit if your trade was correct. The tradeoff, however, is that you could see large losses if your trade was incorrect.

In essence, this method means that in time, it will be possible for; Liquidation to occur, causing you to lose everything. Or you’ll need to add additional fiat currency if Bitcoin the liquidation price (of around $1,600).

Depending on the size of your position, this could be a large investment. Spend the time to think before you invest.

“Does buying back every Bitcoin lost at $1,600 with cash sound like a good investment to you?”

While we can’t answer that question for you, I know many of you have bought Bitcoin at that price before. Would you do it again? For someone holding 10 BTC, that would be equal to a $16,000 investment so long as liquidation is hit in order to re-buy any losses.

A Low Risk, Low Reward Investment

This time, load up between now and $3,00 without a stop loss. Instead, commit to re-adding your position with fiat currency for a long term or even permanent investment if the price ever goes between $1,000 – $2,000. While you won’t have the same reward, you will recover many of your losses as the price goes back up instead of making any extra profits.

In addition to this, you don’t have near enough risk as you would with the second option. That risk could be devastating in the event your liquidation price is reached.

The Bears

Bears will be attempting to short the $4.2k resistance, adding to it if $3k crumbles with whichever targets you aim to purchase your long-term bitcoin investment assets. Depending on your own personal trading method, this could be 2.3k, 2k, 1.6k or 1.1k.

Conclusion

I’d advise all readers to take this post as a warning to stop everything they’re doing and spend some time thinking. The market environment is harsh right now. The will power in the community is low and people are losing hope. I wrote this post in hopes that you’ll maybe stop and recognize this.

Chances are, you’re probably feeling the anger and depression a lot of the crypto space is currently feeling.

Bottoming is a process, not a launchpad.

Anyone playing this game without a plan during this period loses. Regardless. There’s no need to perpetuate the feeling that “this is the bottom” every time the price drops. Instead, devise a trading plan for the next 3 months. One unswayed by the direction in which the market moves.

What’s your plan? Let us know your thoughts in the comments below!

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Disclaimer Notice:

This article is intended to educate and should in no way be seen as investment advice or an enticement to use the ice3x.com platform. Bitcoin is highly volatile with big profit opportunities but you should also remember that you could lose part or all of your investment whenever you take part in any high risk investment. Bitcoin trading is not a regulated industry in South Africa, which in itself carries additional risks. IF YOU ARE NOT AN ASTUTE BITCOIN TRADER, SEEK INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY INVESTMENTS.