Im tired of seeing all the usual panic caused by this and other price drops, so I decided to start a new thread to help counter those panicing a bit and try to keep some perspective. Ambitious I know:p
I know how it feels to see investments and trades go against you and you sit and watch the charts plummet while your balance diminishes, its natural, but i remain bullish and id like to convey why in a simple way. keeping things simple is one of the cardinal rules in trading and investing, and is a great fear antidote.
First though, its important to understand something: IMO most people on here and elsewhere that are spreading doomsday 'it's dropping to $1' panic are simply perpetuating peoples fear and other emotions from the price drops to try to cause liquidity at even further lows so they can
capitalize themselves: IE lows in which they can BUY and then PROFIT from the subsequent price rises. Dont forget, in order for you to sell low there must be a buyer on the other side of that transaction. If all the sellers would hold off for higher prices, the buyers need to then 'give in' and buy for higher prices and this will cause the price to then move up.
I know there will be some that
actually believe btc is doomed and / or are actually hoping for a crash (to push an
altcoin or something), but these ppl are in a minority imho and it doesnt change the fact they benefit from the low prices anyway, so can be treated equally.
This is obvious to many, but worth a mention as ppl seem to forget so easily.
I am bullish for
fundamental reasons:
BTC is a strong new technology and will not 'crash' unless it is 1. completely stamped out and
banned by authorities (we all know that is very unlikely as these institutions are very disorganised and if it did happen would just push it underground anyway, so it will still exist, until such a time as the ban is lifted). Think how far weve come on this front in 12 months.
2.some fundamental flaw in the
technology is found and exploited (Im pretty sure thats even less likely)
3.everyone just
abandons it for some other reason (so far BTC is growing in investment and adoption rates, so there is no sign of this any time soon).
Asides any major catastrophes (like an EMP from a solar flare where bigger problems than btc price is created anyway), BTC is sticking around and is still in the early growth years. These early growth years are turbulent, but it doesnt mean the longer term wont yield even greater heights (eg. the .com bubble caused big losses, but the fundamental tech survived and is now thriving better than ever).
So whats causing the price to drop now in the face of all the good news?
This happens all the time in the fx markets (fiat ones), and doesnt really mean the positive fundamentals are wrong, and doesnt mean the fundamentals wont get reflected into the price later. These fx markets are mainly moved by, what i like to call, 'whales' (traders - not necs individuals - who have the capital to move markets) who throw their weight around by buying and selling in massive amounts to get the price to go where they want it to, not on a minute by minute basis necessarily but on a price 'target' basis. They do their thing and it causes a ripple effect of further smaller fish to act. The fiat fx market is
quiiite a big bigger than btc though, so its far less simple in that world...
To a usual fx whale the btc market is like heaven, however: no regulation, move the market by double digit % with relatively little capital, very little competition and lots of nooby traders to take advantage of. Since the fx market is very quiet these last months, im betting (opinion reminder) a couple or more of these big players are working the btc market recently to make up their margins. So in my humble
opinion, if there are a couple of whale sized players pushing the market around they only need 5~10 million each to do so. They'll want to get the price down as low as possible before things really take off for btc, and considering you can get the price to drop by 5~10$+ with 250k sell orders i think they will find it easy to manipulate it down even further than we are now - theyll want to get as much cheap liquidity as poss to then pump in larger buy orders later and get things moving upwards again.
With the wide scale panic going on it doesnt seem that hard to find sellers at these prices... and theres prob plenty more folk ready to dump at 350, 250 etc. But in the end, they have a vested interest in a higher btc price later. They wont want to short sell this golden goose to death (even if they could).
What will cause the price to rise again?
I believe adoption by new markets is the only substantial thing that will cause a fundamental shift upwards here. Even if amazon google etc adopt it, i think we still need more
new buyers. Since BTC is only used by about 0.5% of the world, there is
plenty of upside potential here. One of the big contributers to the last 2 rallys were new buyers coming in from new markets (not the sole factor but a catalyst).
New merchant adopters are good, but they also have an inherent 'sell' factor as many merchants will routinely sell into fiat after a transaction. New populations adopting btc however, means more buying than selling. Its only a matter of time before the next new market comes in, not if but when.
Since the 'market whales' know this, they want to get the price as low as possible while there is no 'new market rush'.A lower price before a new market moves in means they (whales and new/old markets) will buy even
harder into a new rally. The whales will help to get that rally started when theyve exhausted the low sellers and itll hopefully coincide as near as possible to when a new wave of adoption is triggered (argentina next?).
Im also bullish for
technical reasons:
tech analysis is a funny game, but one of the simplest concepts is 'higher highs with higher lows' usually = further bull trend to come and 'lower lows with lower highs' = bear trend. This is the basis of the most common tech tool: trend lines, but any seasoned trader will tell you these fail quickly but as long as you dont lose sight of the main highs and lows, then you can still identify the main trend. As far as BTC goes, its quite predictable in terms of using fibs, floating S&R with MAs etc but in the theme of keeping it simple, you just need to take a look at the last highs and lows to see what to
expect:
since we are no doubt hitting a low period, in order to find out what low price is 'so low' that were bearish, just look at
the low between the last two highs: it was about $50pBTC. So as long as the price doesnt 'break' this low, were still on the UP. To get an idea of what to
expect for the next high point, check out the
ratios of the lows to highs to lows to highs. While this is rarely exact, just dont lose sight of the big picture.
So, in conclusion, even if im wrong about
why the market is moving down and
what will cause a new rally, as long as the tech analysis is
intact (we dont go below $50) and the main fundamentals are
true (adoption is growing and there are more new markets than saturated markets), then I believe we have plenty of reason not to panic and sell off into this down turn.
In terms of
when, i have my ideas but i wouldnt take them seriously and in the end that shouldnt matter - at least for me as long as the above continues as is, then the 'targets' remain the same (higher lows,higher highs). Could be tomorrow could be 5 years.
Disclaimer: I have a vested interest in a higher btc price: I have long trades open and pending long trades to be filled at lower prices (Im not that confident ill calm the panic that much obviously lol).
Do
not make investment / trading decisions based on my advice.
As a wiser trader than I says often: trade with the
facts, trade with patience and conviction, and only trade it if
you see it.
You should only trade/invest with what you can afford to LOSE (i.e. if you lose 100% of your investment, you will not be significantly affected). If you are adversely affected by the price drop (ie you cant 'afford' to let it drop to X) then you should reassess how much you invested and why and at what price you should exit.
Its late, hopefully that makes sense to someone, sorry if im not clear on some stuff, now im going to sleepzzz. for some further related entertainment, listen to this guy talk about buyers and sellers in the fx market:
http://youtu.be/S7H-MVPlGJw?t=7m
