July 6th 2021, Crypto Chartbook — Bitcoin prices are deceiving
There is a phenomenon in market behavior. Most market participants buy at high price levels. Breakout trades are preferred. Why? The underlying psychological motivation is the need for certainty in an unpredictable environment. While otherwise, people hunt for bargains, look for deals, and buy cheap, they pay up in the markets. In addition, market players get uncertain about buying their favorite stock once it has declined too much. Trust in value is diminished, and fear keeps traders out of the market. Unfortunately, both behaviors aren’t principle-based. Once You identified a desirable trading object, it is low risk if purchasing it when it is cheap. Bitcoin prices are deceiving.
With more volatility, the risk gets higher to buy breakouts, and the fear towards market participation when prices decline is magnified as well.
Consequently, Bitcoin is, from an emotionally intuitive perspective, hard to trade.
Should you struggle with such emotions while Bitcoin is right now to be attained at a bargain, consider the following:
- Bitcoin has had 15 corrections in 12 years, just like this one.
- El Salvador, Paraguay, Panama, Brazil, Mexico and Argentina are heading for full Bitcoin adoption.
- Altcoins hype is losing momentum, and that money flows into Bitcoin.
- Gold and Silver prices are still suppressed by big players, leaving room for Bitcoin to move.
- Paul Tudor Jones increased his Bitcoin exposure from one to five percent.
- Bitcoin has a 200% annualized rate of return over the last ten years.
- Fiat currency’s value loss in purchasing power is rapidly increasing.
- Bitcoin reached a critical mass with its 150 million users, that could quickly expand into the billions.
Bitcoin/Gold-Ratio, Daily Chart, Performance versus insurance:
Gold outperforms inflation by about a percent over the last 100 years, but Bitcoin is necessary for your wealth preservation portfolio to not only have a basic insurance but also some growth. Looking at the Bitcoin/Gold-ratio daily chart above for the last 12 months, you can see how Gold flat lined over this period while an investment in Bitcoin more than tripled your trading capital.
BTC-USD, Daily Chart, Short term risk:
Bitcoin seems to struggle to cement price support above US$30,000, but the short-term perspective often gets overvalued. Price attempted three times to surpass its -1 standard deviation (white dotted line) but failed to reach the mean (blue dotted line).
We have a significant supply zone based on fractal volume analysis near US$32,900. Still it wouldn’t surprise us if Bitcoin temporarily breaks through its directional support (white directional line). And again, this is the very short-term daily picture. Let us have a look at a more suitable time frame for wealth preservation. A time frame that is immune to Bitcoins volatility.
BTC-USD, Monthly Chart, Time on your side:
Large time frame guidance is, in principle, the most important one. Time perspective analysis gets greatly overlooked. Looking at the monthly chart above, you will find that upthrusts in Bitcoin are quite cyclical. Stars seem to align with a healthy retracement, the time cycle having matured and Bitcoin overall being ready for its second leg. Typically, this leg is the largest in size from a technical analysis perspective. As such, we find large time frame plays to be in favor both in risk/reward-ratio and in timing. In our humble opinion, six-figure targets are certainly within reach over the next 6–9 month period.
Bitcoin prices are deceiving:
Anti-cyclical purchases can provide for a massive edge. When you buy a motorcycle in winter, you can get up to thirty percent discounts. Purchasing Bitcoin on one of its typical declines is no different. Like watching for seasonal patterns, it pays to be a contrarian. Professional traders get accustomed to the emotional discomfort. It provides the edge needed to consistently come out ahead in one’s placed trades. To gain the required confidence stepping into the market at times when it is hard to press the button is planning and practice. Write down the reason why you want to own something. Start with paper trading and small position size to accept the risk and try to execute while your intuition would tell you otherwise. Over time, you will find these efforts to be handsomely rewarded, and it substantially changes your overall performance.
Feel free to join us in our free Telegram channel for daily real time data and a great community.
If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.