How you knew Bitcoin would go lower

June 25, 2018

Leading cryptocurrency Bitcoin has hit a new low plunging 70% in just six months. Unfortunately many eager investors have suffered big losses but there's good news. Here's how you could have predicted cryptocurrency markets were in a significant correction.

 

It's easy to say a market or security, like a stock, with a big long term gain would suffer a huge loss. But that's usually fear talking rather than the recognition of how markets play out. Investments with big gains are how you make money but when the tide turns you need to know when to get out. 

 

All markets are the same!

 

Behaviors in a market or security provide far more information than alternatives. After all, how money is moving around determines the net impact in the price trend. But how would you have known to avoid cryptocurrency markets like Bitcoin and Ethereum? 

 

Using the price chart below let's look at Bitcoin and see how indicators, in real time, were a tip off to timing transactions with real money. 

 

The peak is at nearly $20,000 U.S. in December 2017. You don't know that's the peak so let's work through what happens after keeping in mind the market had been performing well above average, out pacing alternatives including the U.S. stock market. 

 

See how the price dropped, in a straight line with no bounce, from the peak to just under $12,000. Some would argue that this is a bull market correction and not a bear market correction as strong markets can have quick sell offs only to recover and march to new highs. But large declines, by nature, are a warning shot as the ability of a market to recover is severely tested. To get back to the high is a gain of approx. 65%. That's a lot! 

 

As the market attempts to rally from the $12K low it stalls at approx. $16K, then drops and retests the low. That's strike two on the market as this is the second significant setback. Think about market sentiment, in real time, as investors are unable to profit or counter losses. But the market ultimately rallies from the $12K low again jumping over $16K getting to about $17K. That price isn't much better but it puts the market in position to advance the recovery and eventually test the old high. The problem is it fails. Notice how price drops back below $16K. Strike three!

 

Then it gets worse. Early in 2018 the market undercuts the $12K low and it does so in a hurry. It also fails to hold the recovery a few weeks later. The rout is on! 

 

Interestingly, the sell signal came early in the December 2017 decline that started the bear market in cryptocurrencies. It was there in real time!

 

For indications on market behaviors use the real time research based on decades of analysis of all financial markets. 

 

 

 

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