This Trading Mistake Holds You Back, Here is How to avoid it | And More in This Weeks Crypto Update.
- Why Bitcoin’s Price Continues to fall? The Halving Cycle is the Answer
- This Chart Showcases Why Cardano Is in Correction Mode
- This Trading Mistake Holds You Back, Here is How to avoid it
Why Bitcoin’s Price Continues to fall? The Halving Cycle is the Answer
Bitcoin (BTC) tumbled below the $30,000 psychological number and lost over 38% of its value since the start of the year. The cryptocurrency market cap also shrank to $545 billion — the lowest level since December 2020. To make sense of the current BTC price drop, we must look at the bigger picture.
Halving Cycle Model
Based on the halving model, Bitcoin seems on track to test the $20,000 support in the long term. The $20,000 level is right near the key, the 50-month simple moving average (SMA), which can be used to track the 4-year halving cycle.
The Bitcoin halving occurs every 210,000 blocks, which typically is every four years same as the presidential elections.
Bitcoin’s 4-year halving cycle goes like this: a rally to a new all-time high followed by a pullback.
The previous pullbacks sent Bitcoin’s price towards the 50-month SMA. Naturally, the close below the 12-month simple moving average triggered the sell-off.
At the time of writing, the 50-month SMA comes around the $21,000 level, so we can expect the price to retest this level to complete the 4-year halving model.
What is the Bitcoin Halving Cycle?
Bitcoin’s price has a strong correlation to its supply. This is because Bitcoin is governed by a fixed monetary policy that has been coded into its protocol. The monetary policy ensures that only 21 million bitcoins will ever come into existence.
The same way the U.S. Federal Reserve issues USD, the Bitcoin protocol issues bitcoins. The U.S. Federal Reserve automatically issues the USD, whereas Bitcoin issues bitcoins via mining. In mining, miners compete with each other in a race to verify blocks and get rewarded with 12.5 bitcoins that are created out of thin air.
The monetary policy controls the issuance of new bitcoins. The Bitcoin protocol halves the supply every four years. The halving occurs every 210,000 blocks, which is roughly every four years.
Bitcoin Halving history
The first halving occurred in November 2012. Since then, Bitcoin has gone through two more halvings. At the time of the third halving in May 2020, Bitcoin had a market cap of $150 billion.
After the third halving, Bitcoin’s price has hit a new all-time high of $68,000 and had a market cap of over $1.2 trillion.
Based on the previous cycles, the bottom around the 50-months SMA takes anywhere between 6 months and up to 8 months to complete following the break below the 12 SMA. Therefore, we should be hitting bottom soonish.
This Chart Showcases Why Cardano Is in Correction Mode
Cardano (ADA) has followed the same path into a bear market as most other cryptocurrencies. However, based on the Elliott Wave theory, the entire decline from the September 2021 all-time high of $3.16 is not impulsive, but it’s corrective in nature. Below, we’re going to explore why that’s the case.
What is a Correction?
In Elliott Wave analysis, a correction is a price movement that goes against the dominant trend. For example, if the market is in an uptrend, then the correction can be called a bearish sequence. In the case of Cardano, the correction is bearish, since the prior trend was bullish.
Elliott Wave Analysis
In Elliott Wave analysis, one of the most advanced principles states that corrective sequences unfold in 3,7,11 swing waves. On the ADA daily chart, we can count 7 wave price swings from the $3.16 high.
The first swing ended with the $1.81 low, which was followed by a bounce in the second wave swing. Down from the $2.40 high, the third swing wave ended at the $1.12 low. Another correction followed in the fourth swing wave, culminating with the $1.63 high.
The fifth swing wave ended at the February 24 low, and the correction upwards completed the sixth swing wave at the $1.24 high.
Short-term, the seventh wave can be called completed at the current low of $0.38. With the RSI oscillator breaking above the 50 mid-level, we have more confidence to call the correction finished.
As long as the $0.38 low remains intact, the entire price correction can be called finished. However, a break below the seventh swing wave will open the door for another 3 swing waves lower.
The nearest resistance levels are at $0.50 and $0.55. A break above these levels will likely push the price of Cardano towards $0.70, where the 50-day moving average is currently located.
This Trading Mistake Holds You Back, Here is How to avoid it
The fear of missing out (FOMO) is one thing that holds you back as a trader. If you want to learn how to mitigate this PnL killer, you’ve come to the right place. Let’s start sharing critical lessons on how to overcome FOMO so you can grow your trading account!
Since FOMO is a psychological phenomenon, it’s essential to deal with it from a psychological point of view. If you want to build a strategy to overcome FOMO, you need to change your thinking process. The key part you need to work on is the fear aspect.
Fear in trading occurs when we perceive a threat. The critical issue that we need to understand is that fear instills not because we have missed a trade, but the issue is that we regard that to be a threat to our success.
When our brain feels attacked or threatened, we’re more likely to act impulsively. The obvious conclusion is that we can overcome FOMO by eliminating the threat factor. We’re all going to have missed trading opportunities throughout our trading careers.
A practical way to overcome FOMO in trading is to change your thinking process. What we mean by this, is to change your thinking pattern about missed trading opportunities. The fundamental principle to get a solid grasp of is that our thinking creates our responses. In other words, if we perceive missing a trading opportunity as a threat, we’re for sure going to trade impulsively.
The good news is that we can learn to change our thinking by reprocessing our minds. We do this by keeping a trading journal where you write down the consequences that occurred as a result of taking a trade based on FOMO.
The most common negative consequence as a result of FOMO is that impulsive trading often leads to losing trades. This is primarily due to the fact that when we are under the effects of FOMO, we tend to “chase” trades. Chasing trades means that sometimes we would buy a coin even after it has risen a lot, just because we are fearful of missing out on the big profits. Therefore we end up buying high, and when the coin eventually drops, so do our profits.
Bottom Line: You need to change your thinking process by focusing on the consequences of FOMO so that the next time you miss a trading opportunity, you associate that fear with the negative effects of FOMO.
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