BITCOIN: "As Soon I Get Out, They Pull Me Right Back In!"
Hey there! It's been a minute, as groomsman duties and an illness put me on the shelf for a while. And boy, has a lot happened since I was gone. At last check, I analyzed the broken bull trend from 2018-05-06 to 2018-05-11. With Consensus 2018 looming, I speculated if it was best to sell or HODL. My conclusion, despite promising predictions from Fundstrat's Tom Lee: "I'm not predicting an automatic rally (or decline) in response to Consensus 2018."
A rally seemed promising after the first day of Consensus, but by Day 2, all traction was lost. In the process, a return to the bear market occurred as well. There are many ways to speculate about this development. Despite a record number attendance, many were critical of the summit's direction. Maybe ticket prices were too high. Maybe crypto coins needed to be a valid payment choice. Maybe they needed to eliminate more fluff and appeal more to the grass-root benefits of blockchain technology. Whatever the problems were, Consensus 2018 did not attract enough new buyers to rekindle the bull market.
And so we're back to where we were at in early April. Yup, we're back to the pink trendline channel that I originally indicated as Bitcoin's bottom. That analysis on April 6th was a rousing success. In fact, even compared to the 2018-05-18 low of $7927.21 that almost touched the central pink trendline, BTC remains at least 1.1K higher than $6795.18, when I published my first idea. So with that said, I'm not worried yet about this current bear trend.
HOWEVER, we have more than a month of new data since then. That changes the picture when it comes to the regression trendline. Therefore, I created a new regression trendline to show the 1.5-standard-deviation range (shown in purple and orange) from the lows recognized on 2017-07-30 and 2018-05-18. This has a much bigger data range than the original regression trendline (2017-09-15 to 2018-04-01), and we almost have a 300-day data range to see where the true outliers are.
Since analysis must always sufficiently fit the context of the subject(s), there is a high importance to fully understand the overbought trends from early December 2017 to early January 2018. The first regression trendline indicated many parts of this period as outliers. This new regression trendline indicates almost the entire period from 2017-12-06 to 2018-01-15 as an overbought outlier. Truth be told, the crypto mania in December got far too out of control. Call it a popped bubble or a correction, but a return to four-digit value was inevitable, for now. Thus, we can ignore those outliers as comparative points, even if we entered the crypto space back in December. (Full disclosure: First buy on 2017-12-09. Lesson learned!)
Despite being very bullish about blockchain technology and several cryptocurrencies, I understand there's still no "best way" to truly value the coins and tokens that make up the crypto market. I appreciate Tom Lee's 36K projection using mining as the focal point of analysis, though. Cost of production is a sound-and-simple way to determine value, as is supply and demand. All said, it could be that Bitcoin's low supply and high production cost eventually set up a sustainable five-digit value, given the increased institutional demand.
To close, note that the new regression trendline's lower bound now falls BELOW the pink trendline channel, so there's a feasible chance that the pink trendline channel fails to hold, and we dip below the 2018-04-01 low. But that's not yet in the cards for now. If BTC drops below the central pink trendline, I'll update this idea.
A rally seemed promising after the first day of Consensus, but by Day 2, all traction was lost. In the process, a return to the bear market occurred as well. There are many ways to speculate about this development. Despite a record number attendance, many were critical of the summit's direction. Maybe ticket prices were too high. Maybe crypto coins needed to be a valid payment choice. Maybe they needed to eliminate more fluff and appeal more to the grass-root benefits of blockchain technology. Whatever the problems were, Consensus 2018 did not attract enough new buyers to rekindle the bull market.
And so we're back to where we were at in early April. Yup, we're back to the pink trendline channel that I originally indicated as Bitcoin's bottom. That analysis on April 6th was a rousing success. In fact, even compared to the 2018-05-18 low of $7927.21 that almost touched the central pink trendline, BTC remains at least 1.1K higher than $6795.18, when I published my first idea. So with that said, I'm not worried yet about this current bear trend.
HOWEVER, we have more than a month of new data since then. That changes the picture when it comes to the regression trendline. Therefore, I created a new regression trendline to show the 1.5-standard-deviation range (shown in purple and orange) from the lows recognized on 2017-07-30 and 2018-05-18. This has a much bigger data range than the original regression trendline (2017-09-15 to 2018-04-01), and we almost have a 300-day data range to see where the true outliers are.
Since analysis must always sufficiently fit the context of the subject(s), there is a high importance to fully understand the overbought trends from early December 2017 to early January 2018. The first regression trendline indicated many parts of this period as outliers. This new regression trendline indicates almost the entire period from 2017-12-06 to 2018-01-15 as an overbought outlier. Truth be told, the crypto mania in December got far too out of control. Call it a popped bubble or a correction, but a return to four-digit value was inevitable, for now. Thus, we can ignore those outliers as comparative points, even if we entered the crypto space back in December. (Full disclosure: First buy on 2017-12-09. Lesson learned!)
Despite being very bullish about blockchain technology and several cryptocurrencies, I understand there's still no "best way" to truly value the coins and tokens that make up the crypto market. I appreciate Tom Lee's 36K projection using mining as the focal point of analysis, though. Cost of production is a sound-and-simple way to determine value, as is supply and demand. All said, it could be that Bitcoin's low supply and high production cost eventually set up a sustainable five-digit value, given the increased institutional demand.
To close, note that the new regression trendline's lower bound now falls BELOW the pink trendline channel, so there's a feasible chance that the pink trendline channel fails to hold, and we dip below the 2018-04-01 low. But that's not yet in the cards for now. If BTC drops below the central pink trendline, I'll update this idea.
Comment:
2018-05-23, 6:40pm EST
Another update means another notable drop for Bitcoin. This time, BTC briefly touched and even slightly surpassed the lower bound of the pink trendline channel. Luckily, there was resistance to send Bitcoin back into the channel.
For now, this puts us firmly on ALERT to BUY, but we **must** wait to be sure that the market will reverse trend before taking any major action. Maybe you can hedge your bet with a partial buy, but you can't get too froggy. Don't bet the house just yet; that's for sure!!
It's possible Bitcoin keeps dipping. Then again, it's possible a recovery starts now. We just won't know for sure until we get more information from the upcoming swings. Note that the RSI is currently in the mid-30's on the daily chart, so Bitcoin will soon become oversold if it keeps dropping.
All said, I think the red wave will soon come to an end, but I still need more evidence before making a full call to buy. Just stay on alert for now!
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Another update means another notable drop for Bitcoin. This time, BTC briefly touched and even slightly surpassed the lower bound of the pink trendline channel. Luckily, there was resistance to send Bitcoin back into the channel.
For now, this puts us firmly on ALERT to BUY, but we **must** wait to be sure that the market will reverse trend before taking any major action. Maybe you can hedge your bet with a partial buy, but you can't get too froggy. Don't bet the house just yet; that's for sure!!
It's possible Bitcoin keeps dipping. Then again, it's possible a recovery starts now. We just won't know for sure until we get more information from the upcoming swings. Note that the RSI is currently in the mid-30's on the daily chart, so Bitcoin will soon become oversold if it keeps dropping.
All said, I think the red wave will soon come to an end, but I still need more evidence before making a full call to buy. Just stay on alert for now!
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Comment:
2018-05-24, 12:45am EST
Both my foreshadowing game and speculation game seems to be on point so far. Indeed, the red wave came to a halt, closing at $7505.00 in the past candle. That followed with today's price action going straight up since the open, showing as much as a $225 increase for the day as of this comment.
Note that the lower bound of yesterday's candle was $7496.17 for yesterday's candle, and it's now at $7515.02, so the new candle fit in snuggly on that lower bound. And once again, that lower bound showed some resistance.
HOWEVER, I MUST SAY WE ARE NOT AT A CONFIRMED TREND REVERSAL. The precedence is there -- see the closing RSI and price location of April 6th -- to say that we just saw the worst of things yesterday. But precedence alone does not make a confirmation.
Once again, my best call is to be on ALERT to BUY, but aggressive bulls at least have a promising case building up for now.
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Both my foreshadowing game and speculation game seems to be on point so far. Indeed, the red wave came to a halt, closing at $7505.00 in the past candle. That followed with today's price action going straight up since the open, showing as much as a $225 increase for the day as of this comment.
Note that the lower bound of yesterday's candle was $7496.17 for yesterday's candle, and it's now at $7515.02, so the new candle fit in snuggly on that lower bound. And once again, that lower bound showed some resistance.
HOWEVER, I MUST SAY WE ARE NOT AT A CONFIRMED TREND REVERSAL. The precedence is there -- see the closing RSI and price location of April 6th -- to say that we just saw the worst of things yesterday. But precedence alone does not make a confirmation.
Once again, my best call is to be on ALERT to BUY, but aggressive bulls at least have a promising case building up for now.
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Comment:
ADDED NOTE
> April 6th close: RSI 33.2003, $9.21 greater than lower bound
> May 23rd close: RSI 33.8203, $8.83 greater than lower bound
Remember, it was on April 6th that I called Bitcoin testing the bottom. After the 6th, BTC briefly got rejected at the central pink trendline, but later broke through after a bullish showing on April 12th. There's still some work left to be done this time around, but this shows the precedence we're looking for come Memorial Day (USA) Weekend.
I'll have more on this in a new idea, depending on the closing price on this candle. But before then, I must say that if Bitcoin starts a green wave now, my confidence in my pink trendline channel will be THAT much stronger.
> April 6th close: RSI 33.2003, $9.21 greater than lower bound
> May 23rd close: RSI 33.8203, $8.83 greater than lower bound
Remember, it was on April 6th that I called Bitcoin testing the bottom. After the 6th, BTC briefly got rejected at the central pink trendline, but later broke through after a bullish showing on April 12th. There's still some work left to be done this time around, but this shows the precedence we're looking for come Memorial Day (USA) Weekend.
I'll have more on this in a new idea, depending on the closing price on this candle. But before then, I must say that if Bitcoin starts a green wave now, my confidence in my pink trendline channel will be THAT much stronger.
Comment:
2018-05-24, 5:45am EST
Looks like I'll need a new idea altogether, because there's been a spotted bear attack on my trendline channel! Just within the past few hours, Bitcoin pierced through the lower bound. Now 7.2-7.3K is the new established low, and it certainly can still go lower.
Yep, the precedence looked nice, but there was a good reason I couldn't call it a reversal yet. Oy vey for the bullish traders...
PHOTO:
Looks like I'll need a new idea altogether, because there's been a spotted bear attack on my trendline channel! Just within the past few hours, Bitcoin pierced through the lower bound. Now 7.2-7.3K is the new established low, and it certainly can still go lower.
Yep, the precedence looked nice, but there was a good reason I couldn't call it a reversal yet. Oy vey for the bullish traders...
PHOTO:
Comment:
ADDED NOTE
The central pink trendline was drawn to EXACTLY touch lows on 2017-09-15 and 2018-02-06, and the upper+lower bounds were designed to account for a 6.4% Bitcoin volatility factor. Like with the regression trendline with 1.5-standard-deviation range, the recent months of data should help to adjust this trendline.
What's funny is that just yesterday, I noted to myself on the chart worksheet what the prorated price increase would look like over months and maybe years. And by looking at that, I questioned when the trendline would need some adjusting to a flatter slope. Sadly, I didn't expect the change to happen so soon.
Note how the projections for the trendline and bounds prorated over time...
> Primary Trendline: $20.15 per day, $120.89 per 6 days, $604.45 per 30 days, $1813.35 per 90 days, $7253.40 per 360 days
> Upper Bound: $21.44 per day, $128.63 per 6 days, $643.13 per 30 days, $1929.40 per 90 days, $7717.62 per 360 days
> Lower Bound: $18.86 per day, $113.15 per 6 days, $565.77 per 30 days, $1697.30 per 90 days, $6789.18 per 360 days
The little more modest slope won't hurt the long-term projection of Bitcoin, as a 6.7-7.7K per year increase seems like a bit too much. (We're at about 5-6K in the past year, just for a perspective.) Again, going to back outliers, that December boost can't be seen as the norm for Bitcoin's ability to rocket in price.
Consider this the last update for this idea. The next few days will determine how much the trendline slope drops, and that may affect my overall confidence in Bitcoin's upward mobility.
But for now, it's just time to lick those wounds from the bears that attacked my trendline channel. All that's left in my camp is a single item of humble pie...
The central pink trendline was drawn to EXACTLY touch lows on 2017-09-15 and 2018-02-06, and the upper+lower bounds were designed to account for a 6.4% Bitcoin volatility factor. Like with the regression trendline with 1.5-standard-deviation range, the recent months of data should help to adjust this trendline.
What's funny is that just yesterday, I noted to myself on the chart worksheet what the prorated price increase would look like over months and maybe years. And by looking at that, I questioned when the trendline would need some adjusting to a flatter slope. Sadly, I didn't expect the change to happen so soon.
Note how the projections for the trendline and bounds prorated over time...
> Primary Trendline: $20.15 per day, $120.89 per 6 days, $604.45 per 30 days, $1813.35 per 90 days, $7253.40 per 360 days
> Upper Bound: $21.44 per day, $128.63 per 6 days, $643.13 per 30 days, $1929.40 per 90 days, $7717.62 per 360 days
> Lower Bound: $18.86 per day, $113.15 per 6 days, $565.77 per 30 days, $1697.30 per 90 days, $6789.18 per 360 days
The little more modest slope won't hurt the long-term projection of Bitcoin, as a 6.7-7.7K per year increase seems like a bit too much. (We're at about 5-6K in the past year, just for a perspective.) Again, going to back outliers, that December boost can't be seen as the norm for Bitcoin's ability to rocket in price.
Consider this the last update for this idea. The next few days will determine how much the trendline slope drops, and that may affect my overall confidence in Bitcoin's upward mobility.
But for now, it's just time to lick those wounds from the bears that attacked my trendline channel. All that's left in my camp is a single item of humble pie...
Right on cue, BTC touches the central pink trendline! For today's candle, the price for the trendline is $7988.58, and BTC dropped as low as $7979.77 as of this comment. So already, it's time to discuss a bit more.
Let me clarify upon the following comment: "So there's a feasible chance that the pink trendline channel fails to hold, and we dip below the 2018-04-01 low." The former possibility sits within the regression trendline 1.5-standard-deviation range. The latter possibility is actually in outlier range, though.
So really, the comment SHOULD be: "There's a feasible chance that the pink trendline channel fails to hold, but a dip below the 2018-04-01 low would be the abnormal 'worst-case' scenario."
This is why I'm not too worried right now. We are still seeing normal price action that is 1.1K+ higher than the Easter low on 2018-04-01. If I see something that threatens the lower bound of the pink trendline ($7477.31 for today's candle), then we can look at potential buy points vs. potential trendline failure.
For now, be on ALERT to BUY if the market decides to reverse in the upcoming days. I'll update my idea once it's some substantial evidence of either trendline resistance or continuing price drop.
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