Tonight, I wanted to do something a little different and look at crypto at a macro level, using the BitcoinUSD pair as my basis, since it is widely considered the "reserve currency" of cryptocurrency. I'm using Coinbase exchange, since it is arguably the most available to everyday people, so I can look at the broad sentiment of the market, not just traders, bots or enthusiasts. I want this to be a guide for me in the future, aswell as a guide for anyone who's wondering what happened back in 2017-2019. For those viewing this in March 2019, I'm not neccesarily "bullish" on Bitcoin right now, but in the long term, the way I see it there is no reason for bitcoin to NOT go up, short of a failure to solve the scalability debate, but its in my belief that one cryptocurrency (I'm personally rooting for Ether) will be able to do that AND maintain security on the blockchain.
tl;dr,: There was extreme FUD that lead to the cryptocurrency crash of 2018. The beginning of 2019 is the first time Bitcoin has looked bullish in one and a half years. As a result, this may be the start of another cycle, and accumulation will begin here. However, I believe a cap to Bitcoin's performance is its' scalability, and we will not see an increase in price past ATH without a solution.
First, I need to talk about what started the bull market:
The best thing about this time (other than the ripple rumors) is that it was a great demonstration of how Bitcoin can really function. The bitcoin fork debate was a long and overdue controversy that was honestly, keeping bitcoin down. Such uncertainty was pretty much preventing people like me and you from being able to explain why they should get bitcoin when it has the opportunity of literally breaking soon. Aswell, all of the toxicity brewed in the space made it so those checking out Bitcoin on social media were suddenly flunged into this internet flame war of hatred and vitriol and a whole lot of uninformed people talking about one of the most complex monetary and information systems to come out, since the internet. Just to drive this point home, imagine that when nerds in their basements were discussing the formation of "an internet" that they also had all of their life savings invested into this... yeah yikes, but it did play out for a lot of them. With the removal of this huge uncertainty, and the addition of a new currency Bitcoin Cash, money began to flow into the market. It was also a demonstration of the two important mechanics of Satoshi Nakamoto's white paper. Forks and Halving. Both successfully done showed that Bitcoin had at least the game theory aspect to become a real autonomous currency.
So with all of this, why did Bitcoin fail in 2018? Simply put, it is not ready to be used as a true currency yet. We have to remember that the goal is to replace all credit cars, VISA is capable of >24,000 transactions per second. Bitcoin is capable of a measly 3-7 (without LN). This is why Bitcoin wasn't going to succeed in the first place, it wasn't and still isn't ready for the wider market. Everyone reading this should view Bitcoin as an ALPHA of a revolutionary monetary, financial, informational, and currency system. This is big.
Lets look at the events that lead to Bitcoin's 2018 crash:
In retrospect, the amount of bad news that was coming out in the time its understandable why the market crashed like it did. The amount of FUD that was induced in pretty much normal investors was going to definitely shake out a ton of weak hands, and as a result the market tanked. I'm not going to talk about all of these, since its very self explanatory. The market was tanked by a ton of FUD. Aswell, the same thing that brought the rise of Bitcoin took it down, Forks. During the time Bitcoin SV was challenging Bitcoin Cash, the fear in the market was palpable. Craig Wright really did sound like he had thought it all out, and was going to crash a cryptocurrency. This would be catastrophic for the concept of Blockchain based cryptocurrencies. It would prove that a malicious actor with enough capital can destroy your investment if he felt like it. Thank fully, were passed that, and now it serves as another reinforcement of Satoshi's fork protocol.
The December - January period for crypto was extremely weird time for me to be in crypto. Typically, when I would tell people about crypto, they would say I was invested in a Ponzi since they didnt understand how markets and value works. However, during this time, I would tell them "hey you should check out ethereum" and they would say "yeah I already bought a ton of REQ" , or a token or XRP. What I noticed was, they didn't know anything about how crypto worked. They thought, since ethereum and bitcoin were too high of a price, that they couldn't buy a divisable form of it, despite that being one of the cornerstone parts of the cryptocurrency. I was absolutely shocked and dumbfounded at the same time. Here it was, the great rally of my lifetime, everyone getting into crypto, my insane ramblings about the future of smart contracts was about to be met, and everyone around me was buying XRP because "It was only a couple of cents bro".
This is why I've came to come up with a new indicator of when to sell. I dub it "the normie crypto index". Just ask 10 people not familiar with markets, if they are invested in bitcoin or crypto. If the overwhelming majority say yes, get bearish because you are in the "public participation" phase.
But in all seriousness, at the time you could definitely tell there was too much FOMO at the time. You can look at google trends chart, youtube views for cyrptos, or even ICO money raised levels. They were aboslutely insane, and they were overbought. We can actually see this on the RSI, showing that at this period it was overbought.
You may be asking yourself, well why is it fine to be high now, but not then. That is because the price isn't at the top right now. In fact, the RSI doesn't neccesarily indicate a sell , just when the market is overbuying. This can be a good thing as demonstrated by the several overbought zones of bitcoin in the past. It is healthy for bitcoin to be overbought sometimes, and then consolidate, and repeat. However, when the RSI was overbought then, it was just pure exuberance.
The beginning of 2019 is the first time that cryptocurrency markets look bullish. There is still bad news, such as Quadriga's CEO death, but it's not at the same rate and severity of 2018. Since the price is so low, were seeing massive amounts of market manipulation with random bot spikes every other day. Consider using these to your advantage. Place a buy at a low point on the graph and wait for a whale to dump it onto your buy order. In all case, if you do chose to follow my analysis( at your own risk, im not responsible for your trades), then anytime in the accumulation phase would be fine, even Dollar Cost Averaging can reduce the risk that bots present. In all, markets look "better" then before, but I would not consider this the definite "bottom" until we break the descending trendline, and maybe until we break the 50 day EMA. Be careful, we've all seen a descending triangle before in 2018, and there is a STRONG risk that markets take a nose dive to 2k levels. I still wouldn't consider this the end of cryptocurrency as I told you earlier, bitcoin is in its infancy, and it will, either in concept as a blockchains proliferate, or as a serious contender in the future.
If you made it down here, Thank you for reading this. Please give me your comments on this. Tell me what I did wrong, good, or what I missed. I really appreciate you having read, or at least skimming down here.
tl;dr,: There was extreme FUD that lead to the cryptocurrency crash of 2018. The beginning of 2019 is the first time Bitcoin has looked bullish in one and a half years. As a result, this may be the start of another cycle, and accumulation will begin here. However, I believe a cap to Bitcoin's performance is its' scalability, and we will not see an increase in price past ATH without a solution.
First, I need to talk about what started the bull market:
- Block Reward Halving - Reduced supply, increased demand via demonstration of technology
- Ripple Rumors - this was back when coinbase listings were HUGE, a definite boost to the price( I actually remember my french teacher telling me to buy in before this. Guy traded rare metals, but was somehow above the curve.)
- Bitcoin Fork - This one is big, I discuss it below.
The best thing about this time (other than the ripple rumors) is that it was a great demonstration of how Bitcoin can really function. The bitcoin fork debate was a long and overdue controversy that was honestly, keeping bitcoin down. Such uncertainty was pretty much preventing people like me and you from being able to explain why they should get bitcoin when it has the opportunity of literally breaking soon. Aswell, all of the toxicity brewed in the space made it so those checking out Bitcoin on social media were suddenly flunged into this internet flame war of hatred and vitriol and a whole lot of uninformed people talking about one of the most complex monetary and information systems to come out, since the internet. Just to drive this point home, imagine that when nerds in their basements were discussing the formation of "an internet" that they also had all of their life savings invested into this... yeah yikes, but it did play out for a lot of them. With the removal of this huge uncertainty, and the addition of a new currency Bitcoin Cash, money began to flow into the market. It was also a demonstration of the two important mechanics of Satoshi Nakamoto's white paper. Forks and Halving. Both successfully done showed that Bitcoin had at least the game theory aspect to become a real autonomous currency.
So with all of this, why did Bitcoin fail in 2018? Simply put, it is not ready to be used as a true currency yet. We have to remember that the goal is to replace all credit cars, VISA is capable of >24,000 transactions per second. Bitcoin is capable of a measly 3-7 (without LN). This is why Bitcoin wasn't going to succeed in the first place, it wasn't and still isn't ready for the wider market. Everyone reading this should view Bitcoin as an ALPHA of a revolutionary monetary, financial, informational, and currency system. This is big.
Lets look at the events that lead to Bitcoin's 2018 crash:
- Mempool fills up - $30 transactions prove that Bitcoin is unuseable
- Bitconnect Crash
- Korea FUD - in hindsight, this wasn't even nearly that bad. However, at the time it filled markets with uncertainty
- Coincheck hack - Millions lost on Japanese exchange
- SEC Statment on ICOs, Binance is sortof hacked?
- ICO ads are banned on Social Media
- EMA death cross - From a TA point of view, this is when you were to sell.
- China Bans exchanges - grossly over exagerated at the time, China is still a big part of crypto as well
- Bitcoin Tanks on Bitcoin SV fork - I'm going to be honest, I sort of blame Craig Wright for creating the FUD that demolished the crypto market in November.
In retrospect, the amount of bad news that was coming out in the time its understandable why the market crashed like it did. The amount of FUD that was induced in pretty much normal investors was going to definitely shake out a ton of weak hands, and as a result the market tanked. I'm not going to talk about all of these, since its very self explanatory. The market was tanked by a ton of FUD. Aswell, the same thing that brought the rise of Bitcoin took it down, Forks. During the time Bitcoin SV was challenging Bitcoin Cash, the fear in the market was palpable. Craig Wright really did sound like he had thought it all out, and was going to crash a cryptocurrency. This would be catastrophic for the concept of Blockchain based cryptocurrencies. It would prove that a malicious actor with enough capital can destroy your investment if he felt like it. Thank fully, were passed that, and now it serves as another reinforcement of Satoshi's fork protocol.
The December - January period for crypto was extremely weird time for me to be in crypto. Typically, when I would tell people about crypto, they would say I was invested in a Ponzi since they didnt understand how markets and value works. However, during this time, I would tell them "hey you should check out ethereum" and they would say "yeah I already bought a ton of REQ" , or a token or XRP. What I noticed was, they didn't know anything about how crypto worked. They thought, since ethereum and bitcoin were too high of a price, that they couldn't buy a divisable form of it, despite that being one of the cornerstone parts of the cryptocurrency. I was absolutely shocked and dumbfounded at the same time. Here it was, the great rally of my lifetime, everyone getting into crypto, my insane ramblings about the future of smart contracts was about to be met, and everyone around me was buying XRP because "It was only a couple of cents bro".
This is why I've came to come up with a new indicator of when to sell. I dub it "the normie crypto index". Just ask 10 people not familiar with markets, if they are invested in bitcoin or crypto. If the overwhelming majority say yes, get bearish because you are in the "public participation" phase.
But in all seriousness, at the time you could definitely tell there was too much FOMO at the time. You can look at google trends chart, youtube views for cyrptos, or even ICO money raised levels. They were aboslutely insane, and they were overbought. We can actually see this on the RSI, showing that at this period it was overbought.
You may be asking yourself, well why is it fine to be high now, but not then. That is because the price isn't at the top right now. In fact, the RSI doesn't neccesarily indicate a sell , just when the market is overbuying. This can be a good thing as demonstrated by the several overbought zones of bitcoin in the past. It is healthy for bitcoin to be overbought sometimes, and then consolidate, and repeat. However, when the RSI was overbought then, it was just pure exuberance.
The beginning of 2019 is the first time that cryptocurrency markets look bullish. There is still bad news, such as Quadriga's CEO death, but it's not at the same rate and severity of 2018. Since the price is so low, were seeing massive amounts of market manipulation with random bot spikes every other day. Consider using these to your advantage. Place a buy at a low point on the graph and wait for a whale to dump it onto your buy order. In all case, if you do chose to follow my analysis( at your own risk, im not responsible for your trades), then anytime in the accumulation phase would be fine, even Dollar Cost Averaging can reduce the risk that bots present. In all, markets look "better" then before, but I would not consider this the definite "bottom" until we break the descending trendline, and maybe until we break the 50 day EMA. Be careful, we've all seen a descending triangle before in 2018, and there is a STRONG risk that markets take a nose dive to 2k levels. I still wouldn't consider this the end of cryptocurrency as I told you earlier, bitcoin is in its infancy, and it will, either in concept as a blockchains proliferate, or as a serious contender in the future.
If you made it down here, Thank you for reading this. Please give me your comments on this. Tell me what I did wrong, good, or what I missed. I really appreciate you having read, or at least skimming down here.