Is this the Bitcoin top? Prepare for a Volatile May
The near-term vs. long-term outlook for Bitcoin!
Happy Thursday, Alpha Traders. Today we’ll discuss Bitcoin’s recent blow-off top, a string of successful Bitcoin and USD-JPY positions by our community, and my Bitcoin outlook for the long run. Let’s start off by covering a recent Forex trade.
Forex Positions — Taking profit off the Yen.
I exited my short in USD-JPY, a successful run from 106.85 to 106.55, a total 0.42% profit. I expect the price to consolidate. I think there may be a mini short squeeze, so I want to get back into that trade if there is a squeeze. If the price starts breaking down from consolidation, I plan to re-enter a short toward the target profit markers of 105.147 and 103.081. We’ve been mapping out this trade for a week and a half, and we’ve traded the asset quite successfully.
Bitcoin blow-off top, what now?
Unless you’re living under a rock, you’ve noticed there was a blow-off top in crypto just yesterday, the price went all the way from 8000 levels to about 9500. Now we’re back inside the 8800–8900 territory. Let’s figure out why the price is resting within that range.
Yesterday our community mapped a long position at the breakout from 8940 all the way to 9225, a 3.5% profit altogether. Shortly after the profit target was hit, BTC dumped quickly. I was lucky to secure gains, but the price continued to move further up after that. Here’s how I look at that continuation: Zoom into the 15 minute chart and notice how the movement to the upside before a top was set is composed of smaller candles with large bodies. Those candles were slowly inching up, rather than blowing through important levels impulsively in the way the price behaved during my last trade. That was a slow grind compared to the large, impulsive candles that brought us from 8940 to 9225. The top of this entire move paints a sign of exhaustion for the bulls. Buyers weren’t able to withstand the selling pressure, that’s why you see big wicks to the downside, followed by a cascade of selling. If I was awake at the time, I would have possibly shorted around 9200 or 9300 and rode it down to the middle of the block formed by previous consolidation. As of this writing, I’m not in a trade.
If we stretch the previous channel established before we pushed up from 8940, it reveals that the recent blow-off top was a clear deviation of the larger trading range. The fact that we’re trading in this area tells me that bears with large capital wanted to fill positions at higher levels. I mentioned in the Advantage community yesterday that there was a lot of absorption (spotted via Tradinglite) around 9300. Price ripped through a roughly $20 million sell wall but wasn’t able to find support beyond it, which is a sign that there could be a large pool of passive sellers at that level. What that helps you understand
So far, price has hit the high of the larger price channel and there’s a high possibility that the price breaks up from here again. However, bearish signs consider the structure of this blow-off top and the strong selling pressure that brought us back into the previous range.
Until we get out of this trading range and start pushing up higher, I think we’re going to stay contained in this trading range, possibly even making another leg down. If price does fail to hold this range and tests the bottom as resistance, I would alert the Advantage community of a short opportunity.
I’d place my stop for that hypothetical trade either right inside or above the range. This is not investment advice.
Bitcoin — The long game vs speculation
There have been crazy shenanigans near the end of the month, and today’s candle looks horrible at the moment. One of the reasons why I picked 9225 as a profit target for my last trade is because it coincides with a breakdown from the channel that led into the COVID-19 crash. I had no idea how much higher the price was going to push, but I have learned over many years to take profit consistently rather than trying to call tops and bottoms. Price has moved up aggressively over the past several days and if the current monthly candle closes as-is, it increases the odds for more downside over the next several days. I still believe Bitcoin can make another leg down. If you look from the 20k all-time high on the 3-day time frame, the price is still in an overall consolidation period and may be preparing to make another lower high. The overall structure of Bitcoin hasn’t changed.
I’m sticking with the bear case until price gives me a solid 11,000 or 12,000 support level, a higher high on larger time frames, then I’ll be bullish, because at that point we will have escaped several trendlines that have been held as resistance. From a bird’s-eye view, Bitcoin is forming a huge bull pennant, and a solid breakout would see 20k easily. What many people don’t acknowledge is that Bitcoin can still drop to 4200 or 4000 and still be bullish overall.
The price can still hit the key high from November 2013, which corresponds to a consolidation period from March 2017. That’s all the way down near 1200, and in the long run (multiple years) Bitcoin would still be a great investment. Remember, people who bought down at those levels are not underwater, these aren’t tourists to the industry. The people who get flushed are the day traders and speculators, so be extremely careful. Our community exists so that you can avoid the fate of the masses, whether that be liquidation or a series of losses that you eventually cannot recover from.
There are three phases to this market. It begins with the earliest adopters, then comes some mid-level early adopters. Finally there’s the laggard phase, and the laggards are the loudest voices in the hype crowd, the Twitter maximalists and their bearish counterparts, because they entered the scene between 2016 and 2017. The laggards entered when Bitcoin was going parabolic, and many of these traders remain addicted to the high of that volatility.
Many people don’t understand how to value assets based on technicals and fundamentals. To me, Bitcoin could be a very expensive buy at current levels, especially given current global economic conditions.
A long bet on Bitcoin is in some ways a bet on the collapse or reinvention of the current global economic system, just ask any Bitcoin maximalist and they’ll give you an earful. And while the financial system does appear to be getting much weaker, there’s no guarantee that Bitcoin will be the savior.
The use case for Bitcoin may be remarkable, but the average speculator only cares about how to make a quick buck, and the fundamentals of projects like Bitcoin are too often used to hype up the masses. In a nutshell, educate yourself, remain level-headed, and don’t put all your eggs in one basket.
Thank you for being a part of this community. If you resonated with this article, please subscribe to the Discord server. You will get free access to the community channels, where we release tons of free and useful content each day. (We are increasing the price for the Advantage Community subscription from $97 per month to $125 starting May 5, 2020). See more details in the video below.
Information provided by Alpha Trades, LLC is not intended to be utilized in making any financial decisions and is not a solicitation, nor recommendation to buy, hold, and/or sell a particular product, digital asset, or ICO.
This article was adapted from the video below, recorded at 7:28am.