Switching Gears
Bitcoin has sold off through some key levels & I am respecting the downtrend until proven otherwise. This is where I plan to switch analysis gears into looking for opportunities, and correction lows.
G’day Folks,
What a wild week.
For some reason, whenever I get on a long haul flight, the Bitcoin market tends to experience a sell-off ‘event’. The last time I jumped on a long haul flight, we were watching the price of UST-LUNA slowly de-peg and collapse on the runway, where UST was $0.86 when we took off from Mexico, $0.60 when we stopped over in Canada, and $0.25 when we landed in Portugal…
I apologise for yesterday’s flight from Sydney to Texas…
Now whilst this sell-off is very different to the collapse of LUNA, it goes to show how quickly things in Bitcoin can change.
Today is the perfect opportunity for us to clear our analysis decks, and switch gears into this new chapter of the market. I find that after big market moves like this, approaching the market with a pair of fresh eyes tends to go a long way. Sentiment, positions, and behaviour are unlikely to care too much about the last four months, and thus our analysis should follow this momentum.
I will do a quick review of my thinking in the lead up to to this sell-off, assess the damage, and then lay some groundwork for how I’m thinking about the next phase.
A quick summary of my thinking presented over recent reports, but especially in my most recent analysis piece Our First Top Heaviness Signal Flashes Red:
Chop-solidation has been at the core of my thesis since March. This entails a consolidation / correction period on the order of several months is needed to digest the 18-month uptrend. Going lower is often the pathway to going higher.
Top Heaviness has been the key risk which can create a longer-term downtrend, and this appears to have now played out to a reasonable degree.
Volatility had compressed to historically low levels suggesting we were ready to move.
Market panic over Mt Gox and Government sales was a likely catalyst, even though I felt it was likely to result in an over-reaction to the downside.
Near-term expectation of price getting down to 200DMA, and ~$52k at worst. However, I maintain a generally optimistic view that such a sell-off would be unlikely to slay the bull.
So now that price has taken out the Short-Term Holder cost basis ($64.4k), the 200DMA ($58.5k), and tagged a new correction low of $53.5k, how can we prepare for what comes next?
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