1/ HOW TO IDENTIFY THE BITCOIN BOTTOM: A Thread
2/ Since December 2017, Bitcoin has been in a bear market. Professional analysts and casual investors alike (us included) jumped the gun and declared the bottom at each new dip. In this thread, we will explore the simplest and least risky method to call a bottom with confidence.
3/ Calling the bottom on any asset is a daunting task; however, calling an exact bottom is simply not necessary to profit, especially in cryptocurrency. The chart below illustrates the difference between buying the absolute bottom vs. buying near the bottom.
4/ Why isn’t it important? The size and magnitude of movements in cryptocurrency have always been HUGE. Bear markets often result in cryptos losing 80% of their value, while bull markets result in 100x gains. In the end, a 10% difference in your entry price hardly matters.
5/ Our message to crypto enthusiasts - Stop trying to buy the bottom. There is no need. That anxious feeling you get each time you buy? The fear it might drop another $500 or $1000 overnight? That’s a bear market. It is not worth the damage to your portfolio or your psyche.
6/ The remainder of this analysis will focus on classic signs that a market has formed a bottom, using examples from across markets. We will begin first with an in-depth look at the Bitcoin bottom formed after the 2014 bear market.
7/ There are 2 main ways that markets form bottoms, according to Investopedia. Bitcoin’s 2014 bear market accurately reflects the 2nd option. The end of a massive bubble typically starts with a high-volume sell-off, then proceeds to end in the slow, low-volume manner described.
8/ From here we will refer to this bottom formation pattern as a “slow bleed”. Eventually there will be very few sellers of BTC remaining, as was the case in 2014. We think the bottom will take on a similar form.
9/ The 2018 BTC bear market compares well. An important distinction - We use the 3 day chart here, rather than 1 week, because we feel this market has moved at an accelerated rate. Perhaps that means we arrive at a bottom sooner this time around than 2014.
10/ Now we know what volume looks like on the decline. But what about the bottom? The Investopedia excerpt below notes that in a slow bleed scenario, initial volume of the bottom can be “quiet” until a critical point of resistance, where high volume finally arrives.
11/ Let’s apply this to 2014. In the chart, we see the dip below $200 bought VERY quickly. Then, the $200 level holds strong several times. Eventually, high buying volume arrives to confirm the bottom. BTC breaks resistance at $315 on massive volume for further confirmation.
12/ Our thesis - You will NOT miss the next Bitcoin bull run if you simply wait to see high buying volume. You might miss the absolute bottom, but you save yourself the distress of losing more money in a bleeding market. You will have ample time to buy close to the bottom.
13/ Few deniers of BTC remain. Payment solutions giants (Dorsey, Thiel), bank execs (Blankfein from GS), and even gov. orgs (SEC, CFTC) understand its unique value. There will certainly be FOMO on the next run, but until then, we must be patient as market cycles play out.
14/ Most strategies to buy the bottom require advanced skills. They refer to it as “catching falling knives” for a reason. It can be painful. Less experienced traders/investors can average down their cost, or simply HODL. However, we prefer to wait in fiat with our method.
15/ These volatile patterns are nothing new for cryptocurrency. We know that the bull markets we once enjoyed will return again. Until then, take this time to learn more about this brilliant new technology. Patience should be your best friend. Thanks for reading!
Our analysts volunteer their time to bring you as much valuable insight as possible. If you have enjoyed our threads and insight, we would greatly appreciate any support you can offer! BTC donations can be sent here:
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3FuK8rRkZnoszXr1KD4D5kYfuxzXMbRbfu
@jared_behrens And if nobody is buying then who has bitcoin left to sell? Eventually sellers run out
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