Bitcoin Consolidates. Is This The Calm Before The Storm?
Kalen Houck | Oct 05, 2022 06:46AM ET
Since November of 2021, Bitcoin has been down-trending along with the rest of the world markets (the S&P 500, Dow, and NASDAQ have all been making lower lows along with it). However, BTC has found some support around the 18000 level.
The question from here is, does the price continue to form a descending triangle, implying a break to the downside, or do we get a surprise move to the upside? Only price action and volume will tell us in real-time which direction is more likely to have follow-through.
It is currently breaking up through the major downtrend line, but it could easily fall back below and end up being a false break. We need to watch for follow-through (ideally a breakthrough, backtest, and then follow through) to have greater confidence.
But either way, it is risky to try and counter-trend trade and take this long (as we have been in a year-long downtrend). Don’t fight the trend.
Fundamentally speaking, the question on everyone’s mind is this: is this bear market the popping of a bubble or just a massive correction before a large move back up to all-time highs?
It’s hard not to believe that we are just in a longer-term correction and that the long-term upside of Bitcoin is still sound. There are many reasons for this assumption.
- Larger institutions and banks are moving more into the cryptocurrency space .
- Investment companies are offering more bitcoin retirement products leading to more people holding cryptocurrencies for the long-term as people buy and hold.
- There is more mass adoption of Bitcoin through products such as crypto debit cards and Bitcoin payment systems.
- There’s a limited supply of Bitcoin which will keep demand high.
- There is a growing awareness of Bitcoin’s use cases by the public in general.
All of these reasons point to Bitcoin being a fundamentally sound investment long-term. However, that doesn’t mean that we won’t experience some short-term pain.
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In turbulent times like this, it’s critical to go back to the fundamentals of Bitcoin investing and remember why you began investing in the first place. What was your original thesis? Has your thesis changed about the long-term value of cryptocurrency, or is it the same?
Would you feel the same way about your investment if the price of Bitcoin right now was at $70,000, or would you be looking to sell because your trade thesis has changed? We investors must constantly ask these critical questions to remain rational and not let emotions take over.
The more we can detach ourselves from the emotions of trading and investing and instead focus on the fundamental & technical aspects, the more profitable our time in the markets will be. Bitcoin has a great future, but its short-term future is looking rocky.
If you’re an investor with a long-term outlook, keep dollar-cost-averaging into it as we trend down. If you’re a trader looking to swing-trade it, then keep an eye on the long-term downtrend line and that $18,000 level to see how we react to those and take a trade based on that.
Consolidation always precedes movement in price, so either way, be prepared for Bitcoin to start moving aggressively soon.
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