Preparing for A "Best-Case" Scenario
As I've been talking about over the last several weeks, the market SEEMS overdue for some sort of relief rally. Although I believe crypto has begun a longer term downtrend and likely will not see all-time highs in the foreseeable future, it is not unreasonable to expect some hope to be injected into the market before further sustained downside. Of course, the market can also continue its death-spiral, but I'm seeing what usually constitute bottoming signals:
1) Overwhelming negative sentiment
2) Retail traders becoming interested in shorting
3) Extremely negative articles in the news
4) Low Bitcoin exchange balance - this one may not mean much since supply doesn't need to affect traded price, but historically the balance goes UP along with major distribution, not down.
5) Indicators. The MACD, Ultimate Oscillator, and Stoch all leave room for several weeks of upside, even if it's a slow grind.
Unfortunately, many of these "bottoming" signals already presented themselves at the three previous "floors," at $32k, $28k, and now $17.6k.
Most traders trying to time a bottom still expect the crypto market to reach a new all-time high eventually. I do not operate under this assumption anymore. I think most of those people will get rekt and throw good money after bad. This would be the phase where the larger exchanges assume even more risk to keep the market afloat, and the next leg down begins when those larger firms capitulate as well. I think the biggest crypto bulls (C.Z., Michael Saylor, etc.) will be forced to admit defeat before bottom is reached. This is just my brazen opinion.
What's Different This Time??
The only thing that *could* be different this time is that declining oil prices may alleviate liquidity constraints across markets. We may even get a rapid deflationary period, kind of in a whipsaw reaction to easing supply bottlenecks and fuel price relief. Michael Burry mentioned something about this recently. Deflation could lead to momentary relief in markets, as people buy back some riskier assets. However, it may also be accompanied by declining profits for companies, and eventually severe layoffs. Optimistically, this could improve the outlook for small businesses and community organizations, but cause mayhem for large corporations. All of this is speculation, of course, since there are so many interacting variables with unpredictable behavior and outcomes.
Why Would The Market Go Up, if Everything Sucks?
I myself have been incredibly negative about crypto since the beginning of 2022, well before most of the carnage hit the market, so I was able to reduce my risk and get out in time. Here is the post that marked my transition from long term bullish to longer term bearish, in the very beginning of 2022. I received criticism from more experienced investors for being too flighty.
But now is it time for me to become more positive? Am I still being too flighty? To be honest, I still don't see anything of substance emerging from the crypto market, but I do admit that the emotions of traders are likely to continue being manipulated, which could result in some surprisingly large upside moves. I think the most likely way traders will be manipulated is to the upside. Hence, I am looking for some opportunities at current levels to buy a little bit, to be sold towards the end of the year. I am so disconnected from any emotional attachment to crypto at this point that I can have a fairly balanced approach, and not care about wishing new all-time highs into existence.
On the above chart, I've drawn a speculative trajectory to show a somewhat realistic outlook for the coming months, based on the broader market structure and sentiment. This is the best I think we can hope, if the market is to bounce. I think there is a slim possibility for a complete reversal here, but I noted the conditions necessary for that in my last analysis, linked here:
People are now talking about the Pi cycle bottom indicator for Bitcoin, which just flashed. Sure, this can be a bottom. As I keep saying, buyers are welcome to that $20k Bitcoin at any time, although bulls really don't want to see it become heavy resistance. As it now stands, the 200 week MA is already becoming resistance for the very first time in Bitcoin's history.
This is really bad news. But, it still holds on the TOTAL chart.
What's particularly interesting about the above chart is that the TOTAL crypto market cap tested its 2017 all-time high perfectly. If it continues to hold, I think the market can build a bit of a base here and try to exit the downtrend closer to the end of 2022. My speculation is that this breakout fails and TOTAL cannot hold above its next major weekly Moving Average (100 MA, yellow), while traditional markets make a lower high peak after weeks of slowly grinding up. Then, once 2023 begins, markets enter a new phase of implosion. I think it's fairly likely we see some debt-related liquidations across major financial firms in the U.S., as the central bank will remain under stress due to over-reliance on the dollar. The crypto collapse in this case is a strong warning signal to major financial institutions. Without the ability to print much money, I think we enter the worst depression since the 1929. Something like this:
How Can We Avoid The Collapse?
Unless economic conditions sort themselves out miraculously, and unless humanity does some seriously aggressive problem-solving, I think it will be really hard to avoid a depression. Most importantly, the U.S. needs to motivate its workforce and develop projects people actively want to work on - such as improving transportation infrastructure and water management/conservation infrastructure. This could actively solve both inflation and labor issues while helping us move forward in a future that will likely be characterized by severe clean water shortages and changes in how we use fuel. Unfortunately, humans have been trained to be more reactive than proactive over the last century, which makes the aggressive problem-solving more likely to occur once we have reached peak disaster, rather than beforehand. Part of this is due to exploitation and wealth inequality. Since the wealthy elite hold the power and they also do not feel the effects of global economic turmoil until things are at their worst, they are unlikely to do anything preventative. This isn't always because they are bad people, but simply because their privilege makes them blissfully unaware, and less likely to take actions that they see as too "drastic."
The good news is, major contractions are opportunities for growth, in the longer term. Think of it as a necessary growing pain for humanity.
Now if this is the BEST-case scenario, what's the worst? Well, the market can actually just continue to the downside here and offer zero opportunity for people to get out at higher prices. This becomes more likely if traditional markets have not yet reached their short-term bottom, and if more systemic issues surface. Even if Bitcoin heads to a new low shortly, there is still the possibility for a relief rally in the coming months, although it's mostly guesswork.
This is not meant as financial advice. This is meant for personal use, speculation, and entertainment only.
-Victor Cobra
1) Overwhelming negative sentiment
2) Retail traders becoming interested in shorting
3) Extremely negative articles in the news
4) Low Bitcoin exchange balance - this one may not mean much since supply doesn't need to affect traded price, but historically the balance goes UP along with major distribution, not down.
5) Indicators. The MACD, Ultimate Oscillator, and Stoch all leave room for several weeks of upside, even if it's a slow grind.
Unfortunately, many of these "bottoming" signals already presented themselves at the three previous "floors," at $32k, $28k, and now $17.6k.
Most traders trying to time a bottom still expect the crypto market to reach a new all-time high eventually. I do not operate under this assumption anymore. I think most of those people will get rekt and throw good money after bad. This would be the phase where the larger exchanges assume even more risk to keep the market afloat, and the next leg down begins when those larger firms capitulate as well. I think the biggest crypto bulls (C.Z., Michael Saylor, etc.) will be forced to admit defeat before bottom is reached. This is just my brazen opinion.
What's Different This Time??
The only thing that *could* be different this time is that declining oil prices may alleviate liquidity constraints across markets. We may even get a rapid deflationary period, kind of in a whipsaw reaction to easing supply bottlenecks and fuel price relief. Michael Burry mentioned something about this recently. Deflation could lead to momentary relief in markets, as people buy back some riskier assets. However, it may also be accompanied by declining profits for companies, and eventually severe layoffs. Optimistically, this could improve the outlook for small businesses and community organizations, but cause mayhem for large corporations. All of this is speculation, of course, since there are so many interacting variables with unpredictable behavior and outcomes.
Why Would The Market Go Up, if Everything Sucks?
I myself have been incredibly negative about crypto since the beginning of 2022, well before most of the carnage hit the market, so I was able to reduce my risk and get out in time. Here is the post that marked my transition from long term bullish to longer term bearish, in the very beginning of 2022. I received criticism from more experienced investors for being too flighty.
But now is it time for me to become more positive? Am I still being too flighty? To be honest, I still don't see anything of substance emerging from the crypto market, but I do admit that the emotions of traders are likely to continue being manipulated, which could result in some surprisingly large upside moves. I think the most likely way traders will be manipulated is to the upside. Hence, I am looking for some opportunities at current levels to buy a little bit, to be sold towards the end of the year. I am so disconnected from any emotional attachment to crypto at this point that I can have a fairly balanced approach, and not care about wishing new all-time highs into existence.
On the above chart, I've drawn a speculative trajectory to show a somewhat realistic outlook for the coming months, based on the broader market structure and sentiment. This is the best I think we can hope, if the market is to bounce. I think there is a slim possibility for a complete reversal here, but I noted the conditions necessary for that in my last analysis, linked here:
People are now talking about the Pi cycle bottom indicator for Bitcoin, which just flashed. Sure, this can be a bottom. As I keep saying, buyers are welcome to that $20k Bitcoin at any time, although bulls really don't want to see it become heavy resistance. As it now stands, the 200 week MA is already becoming resistance for the very first time in Bitcoin's history.
This is really bad news. But, it still holds on the TOTAL chart.
How Can We Avoid The Collapse?
Unless economic conditions sort themselves out miraculously, and unless humanity does some seriously aggressive problem-solving, I think it will be really hard to avoid a depression. Most importantly, the U.S. needs to motivate its workforce and develop projects people actively want to work on - such as improving transportation infrastructure and water management/conservation infrastructure. This could actively solve both inflation and labor issues while helping us move forward in a future that will likely be characterized by severe clean water shortages and changes in how we use fuel. Unfortunately, humans have been trained to be more reactive than proactive over the last century, which makes the aggressive problem-solving more likely to occur once we have reached peak disaster, rather than beforehand. Part of this is due to exploitation and wealth inequality. Since the wealthy elite hold the power and they also do not feel the effects of global economic turmoil until things are at their worst, they are unlikely to do anything preventative. This isn't always because they are bad people, but simply because their privilege makes them blissfully unaware, and less likely to take actions that they see as too "drastic."
The good news is, major contractions are opportunities for growth, in the longer term. Think of it as a necessary growing pain for humanity.
Now if this is the BEST-case scenario, what's the worst? Well, the market can actually just continue to the downside here and offer zero opportunity for people to get out at higher prices. This becomes more likely if traditional markets have not yet reached their short-term bottom, and if more systemic issues surface. Even if Bitcoin heads to a new low shortly, there is still the possibility for a relief rally in the coming months, although it's mostly guesswork.
This is not meant as financial advice. This is meant for personal use, speculation, and entertainment only.
-Victor Cobra
Comment:
I'll also add that raising taxes on the wealthy and corporations to healthier levels could combat our economic woes (especially for the highest earners - closer to 70%, as was the standard after the great depression). It removes the money from inflating asset values and entering the system, and instead puts it towards important material projects (such as infrastructure, clean water, etc, like I noted above).
Trade active:
Bought some DOT at $6.30 and ATOM for fun at $7.80 today. Those have been on my “list.” We’ll see if a larger bounce can materialize…
Trade closed manually:
Sold the Atom at a slight profit and DOT at break even. Can’t get myself to commit anymore. Really need some more conviction from the market and a clearer structure. May just decide to continue staying out entirely.
Comment:
If Bitcoin is to drop lower from here, we could see a large capitulation wick before the kind of relief rally I’m looking for. As I mentioned, it’s really a guessing game, and it’s much harder for me to “accumulate” when I don’t hold a long term bullish view anymore.
Comment:
Well well well, looks like my instinct was right - should have held onto those small altcoin positions ; ) In any case, it's still a guessing game. it seems many think this is a fake pump, so I wouldn't be surprised to see Bitcoin break out towards the high $20k's here. On the other hand, ETH is moving up substantially. As I've mentioned, Bitcoin dominance dropping is not usually a good sign for Bitcoin.
Comment:
Interestingly, this "best case" scenario ended up manifesting, but delayed many weeks from my projection. Nevertheless, the peak prices for this rally roughly coincided with my expectations. Now let's see if the market takes another step down.
