Most analysts, be it on Twitter, Facebook or on a shitty TV show, agree that it must be so.
I disagree and I’ll show you why.
The current situation isn’t one Bitcoin hasn’t faced before.
In 2014 Bitcoins price shot up parabolically to (back then) all time highs, couldn’t sustain the move up resulting in a break of the parabola ending in a crash.
Very similar to what we’re currently going through.
Acceptance, development and interested in the technology has changed drastically since then but even so the charts are similar and I, as a technical analyst, look at that past data to support or refute my arguments.
That is why the 2014 crash is important to me:
4 Touches of the trendline and a breakthrough on the 5th, a classic.
Doesn’t look to bad does it?
Well check out what followed:
Beautiful breakout followed by a massive dump resulting in a 2 year bear market.
Once the bear market ended Bitcoin still needed another 500 days to return to old highs.
Now I dislike spreading fear, uncertainty and doubt but as an analyst this is data I have to look at, whether I like it or not.
However a similar looking downtrend line doesn’t justify comparing 2014 to 2018.
That’s why I’m also looking at the horizontal levels:
The percentages and RSI of each drop are eerily similar.
So not only are the diagonals similar the horizontals are too.
Now lets compare the market structure from back then to now by overlaying both of them.
Red= Today, Blue = 2014
(Some people on Twitter have done this better than I have, it can get even more accurate)
Fits scarily well doesn’t it?
This is something that demands attention, it doesn’t have to play out, fractals never have to.
They just show how price has moved in a similar situation before and help guide us in our decision making.
I’m never going to take a trade based on a fractal alone but this fractal might make me not take a trade I would’ve otherwise taken.
“History doesn’t repeat itself but it often rhymes”
Trendline breaks are often followed by either:
- A retest of the trendline (Resulting in an opportunity to buy below breakout in a downtrend)
- A fakeout and a strong dump after
Markets very rarely go straight up right after a downtrend line breakout and when they do I usually don’t trust it to stick long term.
I dislike breakout trading but the few times I do do it, it’s always after a positive retest. There is little I trust less than a diagonal trendline breakout before it retested the diagonal positively. (And even then I don’t trust it much)
Don’t just blindly trust a trendline break, it doesn’t have to mean anything if no one is buying afterwards and is often used by bigger players to sell their shares to newbie traders.
The best way to screw as many people over is to make Bitcoin break out and dump right after.
Markets tend to move the way that screws the majority.
That is why I think we’ll break the downtrend line but I doubt that the low we make before we do so is THE low.
I’d be ecstatic if it would be but I doubt it.
This isn’t to say I expect a 2014 like bear trend, I feel like the market is moving faster now than it did back then.
I just expect the breakout traders to get majorly rekt and once they’re out of the market an organic accumulation phase into new all time highs.
For the people fuming ready to write an angry comment about how I’m comparing 2014 and 2018 while the tech, acceptance and interest is far better now than it ever has been:
After everything is said and done Bitcoin is a majorly improved currency but still relies on the people using it to think it’s worth anything, to be worth anything.
As long as there are more sellers than buyers at a certain level price will go down and vice-versa.
That’s all there is to it and a change in public perception will make it lose a lot of value quickly, no matter how good the fundamentals are.
