interesting post by BitcoinBravadoIntroductionBetween the 13th and 28th of October 2017 Bitcoin consolidated between $5400 and $6200 before its massive uptrend towards $20,000. After breaking upward $BTC later retested this order block one more time in November, falling from $8000 to $5500. From there, it took $BTC only 5 weeks to reach $20,000.
The consolidation level mentioned was revisited a mere 8 weeks later. Bitcoin lost 50% of its value in two weeks, dumping from around $12,000 to sub $6000. The reaction to this level was so strong that it served as a bottom up until 2 weeks ago. Bitcoin bounced off the $6000 level around 6 times, with each subsequent bounce becoming weaker and weaker. Anyone who longed crypto around the $6000 level returned very well in 2018. Now that this level has broken down, we need to look to a new structure in the market and come up with a strategy to trade it profitably.
The Descending TriangleOnce the descending triangle broke down, it served as confirmation that the whole triangle had been "distribution." Savvy traders and significant market players shorted Bitcoin into the low $6000 region and then closed these shorts, creating shorter-lived rallies. In general, as descending triangles break down, their targets, for the conclusion of the triangle, are the percentage from the top of the triangle to the bottom of the triangle, added to the breakout.
Simply put: if the triangle from top to bottom saw a price decrease of 50%, the target lies around 50% below the breakout level ($6000). We believe this to be the case for Bitcoin and this image speaks a thousand words:
The Halving – A Look AheadWe think that by 2021, Bitcoin will likely see a new all-time high. This is based on market cycle analysis of historical speculative, innovative assets (like Gold) and the history in which Bitcoin has behaved itself in regards to the so-called halving.
The halving of Bitcoin is a specific moment in the creation of blocks on the Bitcoin chain where the reward for miners to mine Bitcoin blocks gets reduced. On average this happens every 4 years. We had the first halving in 2012, the last one in 2016. The next halving is expected to occur around May 2020. As the rewards decrease 50% on each halving, the amount of newly mined Bitcoins entering the market becomes significantly less. In the current period, ~1800 Bitcoins enter the market daily. After the next halving, this will become ~900 a day.
Historically, the halving led the start of a new or continued bull market:
Dollar Cost AveragingNobody can say for sure what the exact bottom will be until it's well in the past. This is why buying 'spot Bitcoin’ (non-leveraged long positions at market value) on the way down can be a risk-averse strategy for scaling into a long-term position. This technique that we have mentioned time and time again is called Dollar Cost Averaging or in short DCA. When one uses DCA, they 'ladder buy' all of their orders on the way down, adding to the position at specific timeframes, price levels or decline percentages.
As this bear market has in no way changed our long-term outlook for Bitcoin, future prices at least surpassing all-time-highs (~$20,000), we believe that buying Bitcoin at and below current levels ($3,500 at time of writing) has a reasonable probability of becoming a profitable decision. If our long-term outlook becomes a reality, an average entry at these levels will return a gain of at least 700% as BTC approaches its all-time high and beyond. Please remember, this is highly speculative, and past performance is not a guarantee of future results. Bitcoin may never increase in value again, we just don't think that's likely.
The advantage of Dollar Cost Averaging is that you don't have to guess precisely where the bottom will occur. Our approach at this time is to invest 50% of our intended fiat investment stack, in increments, starting at levels where we think Bitcoin is a steal long-term and levels that we believe a bottom for $BTC could be printed.
The other 50% of our investment stack is reserved for either one of two scenarios:
Scenario A - We completely misjudge the potential bottom and Bitcoin reaches its ‘worst- case scenario’ level. In this scenario, we have 25% of our reserved capital waiting to enter at insanely low levels and another 25% reserved for deployment upon confirmation of trend reversal.
Scenario B - If we see signs of a trend reversal and our bias turns back to bullish, then at this point we will use our DCA strategy on the way up instead. As it currently stands, we believe a reversal in trend would be confirmed when we see a weekly close above the $6000-6300 range. We will then add the remainder of our fiat investment stack to our position on retraces into important support structures.
Our DCA Target EntriesWe will start DCA'ing just under our recent lows between $3500 - $3700. Our analysis tells us that $2950-3200, when reached, is a level that should see a lot of trade volume and is a price that we think in the long term will see great returns (2020-2021), thus evidently this is our next target range.
The next level of interest will be $2400-$2625, which represents our teams "consensus bottom." This is the level we feel represents the highest probability of serving as a bottom for this cycle.
The worst-case scenario in our opinion is that Bitcoin retraces to $1120, to completely retrace its breakout from the 2013 ATH. We are spreading 25% of our bids throughout these "lower probability" ranges just in case. If Bitcoin were to trade anywhere below $850 (extremely unlikely in our estimation), it becomes questionable what the future of Bitcoin is.
The fiat that ends up not being used, if specific ranges are not visited, will be added as we see trend reversal signs. True signs of a macro trend reversal would be a weekly close above $6000-6300. We will then re-evaluate and update this strategy as to where we will place our remaining bids.
Higher Probability Levels: 50% total
7.5% - $3500 - $3700
17.5% - $2950 - $3200
25% - $2400 - $2625
Lower Probability Levels: 25% total
5% - $1825 - $2000
5% - $1650 - $1825
5% - $1340 - $1440
5% - $1120 - $1340
5% - $900 - $1120
Final WordsMake sure to tune this strategy to your own circumstances and never overexpose yourself to the market. Overexposure leads to poor emotional decision making and can lead to high levels of stress and financial losses. No one knows exactly where this market is headed, but with proper risk management and a disciplined approach to dollar cost averaging, we believe that the future is going to be friendly to those who stick around through the bear cycle of 2018.
As much as we all wish this bear market to conclude and to regain the feeling of immense returns like we were able to experience throughout the majority of the last few years, we have to let this market cycle play out and remain disciplined and patient. With infrastructure being built every day and the outlook for 2019 and 2020 is focused on institutional products becoming available, the possibility to gain exposure to a new group of investors is high, and it is precisely that what is required to reach new all-time highs.
We are happy to have you with us on this journey to inspire, teach, learn and entertain each other on a daily basis to continually improve ourselves. As we live, breath, eat and sleep cryptocurrency, we will together rise from the slumps of this market.
