Nick Chong · 1 week ago · 2 min read · Insights via Grayscale Investments
The Bitcoin markets experienced extreme levels of fear, with the Crypto Fear and Greed Index reaching a historic all-time low. As BTC hovers around $10,000 traders claim it should be taken as a buying opportunity. Meanwhile, a handful of respected traders first believe a dip to $8,500 is more likely.
The bear-case for Bitcoin’s future is visible among some of the most cryptocurrency traders on social media. Eric Thies, for instance, argues BTC will reach $8,500 before it goes above $14,000. Another respected analyst, Max Keiser, believes that it is a “coiled spring about to explode higher.”
As Bitcoin’s history continues to unfold, the bearish and bullish perspectives must be taken into account to reduce risk and limit exposure.
The bear case
Since mid-December 2018, Bitcoin rallied nearly 350 percent. After peaking at $13,870 on June 26, many investors thought the market was getting too hot and took profits. As a result, BTC retraced 34.60 percent to reach a low of $9,080 on July 17 and entered a consolidation period.
So far, Bitcoin has consolidated for more than sixty days, making lower highs and higher lows. This led the crypto trader Bob Loukas to believe that the intermediate rally, that began in December, ended. Loukas instead insists that Bitcoin could be posed for a “major shakeout” before continuation of the bullish trend, with the next cycle’s low around $7,900.
4-Year Journey and #HODL followers.
Buy +hold as if it's going to rocket out of this consolidation.
But know the intermediate term rally from Dec lows ended. Therefore, a major shakeout from this consolidation, before a continuation, would be perfectly normal behavior. pic.twitter.com/NnDBuNeZil
— Bob Loukas (@BobLoukas) August 23, 2019
Along the same lines, @cryptoSqueeze asserts the lower highs Bitcoin is making does not inspire confidence—continuing that BTC breaking above $11,000 is less likely as a result. The trader instead suggests BTC could surge to $10,500 to make another lower high and ultimately drop to support around $7,600 to $7,900.
Daily doji spotted. Expecting price to move up to ~$10,500.
So far, we have lower highs.
Doesn't exactly instill confidence in moving up past $11,000.
Long scalping to $10,400+
Short entry target: 10,500 pic.twitter.com/THVs2esuT2
— Squeezy (@cryptoSqueeze) August 23, 2019
Based on the weekly chart, another 25 percent correction from the current price could be possible, as Bob Loukas and @cryptoSqueeze pointed out. Under this timeframe, the moving average convergence divergence (MACD), which is commonly used to follow the path of a trend and calculate its momentum, had a bearish crossover between the 12-month exponential moving average and the 26-month exponential moving average, as @BigChonis pointed out.
The last time BTC experienced a bearish MACD cross on the 1-week chart was in mid-November of 2018. The bearish formation lead to a 51 percent correction that took Bitcoin from $6,380 to $3,130.
The pioneer cryptocurrency is now starting the current week on the negative side of the gains histogram for the first time since February, which adds credibility to the bearish case, argued BigChonis.
— Chonis Trading-⚔️ (@BigChonis) August 26, 2019
Considering MACD’s previous accuracy at predicting BTC’s movements, @davethewave rightfully highlighted the significance of the ongoing bearish MACD crossover.
The trader added that the 21-week exponential moving average is starting to roll over. As a result, if the exponential average fails to hold the price of BTC then a drop to the 30-week moving average is a real possibility.
All the calls of the 21 week EMA holding has an air of desperation about it. Wouldn't be surprised to see price even briefly going through the 200 MAD [30 WMA]. MACD and price history totally different. The 21 week EMA itself rolling over. pic.twitter.com/wwK4YGuyiP
— dave the wave (@davthewave) August 24, 2019
Despite the negative expectations of the above traders, trader Murad Mahmudov maintains when netted against other indicators BTC is still bullish. After analyzing the previous Bitcoin bull market, Mahmudov concluded that MACD bearish crossovers are actually indicative of local bottoms during bull cycles. Consequently, the coin could instead be preparing for its next upswing, he concluded.
People out here be talking about the Weekly MACD 'bear cross' like its some kind of a doom verdict.
Ironically it marked the local bottom every single time during the last bull cycle.
I repeat for the last time. This is a BULL market. pic.twitter.com/Uk015uk17x
— Murad Mahmudov 🚀 (@MustStopMurad) August 25, 2019
The bull case
Contrary to the belief that Bitcoin has more legs down, Mahmudov argues that BTC needs to consolidate for the next few weeks before its next impulse. As summarized by the investment trader at Adaptive Capital, instead of betting to the downside investors should embrace Bitcoin’s up trend and “submit to it.”
Contrarian view: 9080 was the bottom, ~one more month of sideways then we continue steadily upwards.
Don’t fight a once-in-a-millenium, civilization-changing phenomenon to try to snag a potential 8% off of a local short.
Don’t fight the trend.
Submit to it.
Embrace it. pic.twitter.com/bq7TsK4xZ4
— Murad Mahmudov 🚀 (@MustStopMurad) August 23, 2019
Mahmudov also analyzed the different times that Bitcoin formed a symmetrical triangle, which tends to lead to a bullish breakout. These scenarios seem to coincide with BTC’s current price action (after it peaked at $13,870 on June 26). As a result, the technical analyst is confident that this cryptocurrency will end up breaking out to the upside once the pattern is completed.
1/ Exhibit A pic.twitter.com/yTQLtKuGoD
— Murad Mahmudov 🚀 (@MustStopMurad) August 24, 2019
Additionally, senior quantitative researcher at Ikigai Asset Management Hans Hauge is “very bullish” on Bitcoin. Based on the HODLer Network, which is a technical index that takes into consideration transactions volume, the amount of Bitcoins moved from cold storage into exchanges, and the number of unique addresses, Hauge is confident Bitcoin will continue its upward trend. Hauge believes that the fact that the HODLer Network recently made a new all-time high indicates that more people are actually holding their Bitcoins instead of selling them.
Just a couple days ago this metric made a new all-time high in the 7DMA. This is a very bullish sign to me as it shows that more people are HODLing more than ever. As @APompliano would say, "the virus is spreading." pic.twitter.com/XtHxvr7M26
— Hans HODL (@hansthered) August 24, 2019
Even though the market seems uncertain about Bitcoin’s short-term future, most indicators still point to the cryptocurrency appreciating over the long-term.
Based on the previous bull markets, it is normal for BTC to experience 30-50 percent corrections. And, after Bitcoin’s recent exponential price movement, a steep correction might be necessary to maintain a healthy bull trend.
During the most recent bull market, for instance, which lasted more than two years and represented 100x gains, Bitcoin had eight significant retracements that did not affect its long-term bull trend.
The high of $501 on Nov. 3, 2015, was followed by a 40.39 percent pullback. The high of $784 on June 17, 2016, saw a 38.37 percent retrace. After an all-time high was achieved on Jan. 4, 2017, when Bitcoin was valued at $1,180 it dropped 36.50 percent. Two months after that milestone, BTC hit a new all-time high of $1,320 on Mar. 8, to then fall 32.57 percent.
These highs and lows are cyclical and normal for an asset with as much volatility as Bitcoin. For upside volatility to exist there must be corresponding downside volatility. But, that isn’t to say there isn’t a clear trend.
BTC has consistently been making higher highs. On May 25, the cryptocurrency went up to $2,746 and immediately pulled back 31.38 percent. The high of June 12, when one BTC was worth $2,985, was followed by a 39.20 percent correction. A similar pattern happened after the high of Sept. 1 and Nov. 6 that saw Bitcoin drop 40.12 and 30.09 percent, respectively.
As seen in the past, Bitcoin’s short-lived downturns did not affect the long-term trend. This is because Bitcoin is scarce, with a maximum supply of 21 million units, and is desired by an ever-growing international pool of investors.
This fact has lead Binance CEO Changpeng Zhao as well as Coinbase CEO Brian Armstrong to suggest that the best strategy to profit from Bitcoin is to own and maintain at least 1 BTC, holding it tooth-and-nail over the long-run.
Supposedly, this would guarantee the investor to mathematically become part of the ‘1 percent,’ in terms of Bitcoin, said Zhao (though, this argument was heavily criticized by the likes of Peter McCormack and others).
If this is believed, then the most effective way to reduce exposure risk could be as simple as ‘HODLing.’