Crypto Boom or Bust?
Is the big crypto correction ahead of us or behind us?
In 2022 something changed in BTC. There was a significant drop, it recovered to the high, broke the high and then did not make a further breakout run.
Instead, the previous crash low broke. Both of these are unique events in BTC’s history outside of early highly illiquid conditions.
And I think that probably means something. I think it perhaps tells us we’re going to see a change in the way BTC trades in the future.
It’s Quite a Big Deal
Look at these new highs in BTC.
The trend in BTC has been impressive.
Then this happened.
Something changed. I think there’s two ways this can be viewed.
I’m really bearish at time of writing but here’s both cases:
Bulls:
Price retraced a bit over 76 and is rallying hard. Now at the highs. These are things we see in a new bullish trend leg. If that’s the case, then that’s a big correction in and BTC would have a lot more to go in this leg. It’d be an extension of the pullback we used for targeting. Was a big drop. Big extensions.
Something that occurred to me while BTC was down trending is at this point:
It looked a lot like this.
Two crashes. Nominal breakouts. Set up the big rally. In Elliot wave this would be a expanded flat pattern.
These are wave two patterns. Setting up wave three which is the big trend leg. Theory worked well in 2009 low.
Have been happening before major breakouts forever. Here’s pre 1920s rally.
So the change we’d be seeing in BTC would be a theme of faster crashes less often and persistent trending action at other times. Heading into wave 3 the trend becomes far more stable and reliable. It’s not usually as volatile, it’s just grinds on up. Few ups, little pullback. Range. New high. Retest. Repeat.
Which would be a hell of a rally.
We’ll get into the levels and such later. First, the bear case.
Bears:
The 2008 crash chart sends shivers down my spine as a bear, but realistically it looks like we’d have had that section already.
Leg three happened, right? Then it pulled back. made a new high and
broke structure. That would be wave 5 complete and the big correction.
Next swings implied would be the ABC, the C leg being the worst crash.
BTC has been vey aggressive trading right up o the high but the general structure of the move is like the BB high.
What if we’re in a big left shoulder kinda deal? The breaks in this type of setup come really fast and are hard to position into. Personally I find it easier to short at resistance levels risking fading momentum rather than trying to join during it on the way down. Gives me the option of adding positions and trailing stops if it works.
Looking at BTC in isolation it’s hard to feel overly bearish about it but in the broad context of the various stocks/indices signals and interest rates trends of history - there are a lot of things that all say “Maybe something big is coming”. If “Something big” is coming to the bear side, we should expect euphoria.
Every time since the dot-com bubble markets that went parabolic on interest rate rises crashes when rates had peaked between 5 - 6.5%.
Stats like that coupled up with various signals all firing at once make me bearish on risk assets. Which I consider BTC to be.
For so many reasons the bear move seems to make sense. The bulls are far too confident. I’ve spoken with so many of them and they really do not seem worried about any sort of prolonged risk in this. Many of them seem very naive to investing. Also, many of them do not see holding BTC as being speculative. A lot of faith.
I saw one guy argue a BTC price target would not hit because it would be a 1.1 trillion drop in the market cap and BTC was too popular for 1.1T to be pulled out.
Which isn’t how market cap works.
A sustained BTC downtrend to really low levels was deemed “Almost impossible” off this analysis.
One person told me, “Bears have been wrong since the bottom of the bear market”.
Can’t argue with that.
But it’s not a very well thought out rebuke to the thing I was saying about the change in the trend conditions. I’m not bashing on these people because I know with any different type of life experience or at a younger age I’d have been exactly the same. It’s just hard to believe people do doe eyed are going to get away with it.
I spoke with BTC bulls for a while and tried to debate their talking points. It made me sad and angry at some points. It’s apparent to me a lot of people have everything to lose in this if it goes bad and they have no real perception of that risk. From trend theory - a lot might be at risk.
What if BB does this on a weekly chart.
In terms of where BTC could go long term, I really am entirely agnostic. It might be a huge correction before the a dwarfing rally. It might be the start of a downtrend that lasts the rest of our lives.
One thing that’s always got me is BTC bulls are so incredibly confident for something that can be quoted to multiple decimals.
In theory, BTC could trade 0.00000420.
I’m not saying that’s the short target. I’m just saying if it settled into a real downtrend it could get much lower than people expect. If it’s going to be the case that BTC ends up failing (As a speculative asset at least) it could get into an AMC situation where it’s already down 90% and dropping large numbers most days.
Those horrible rallies for bulls where they so often end up long near highs. Would be very painful for something so many people think is certain to go up later. Imagine these sharp rallies on weekly charts off 5,000. You think some people might be tempted to take a bit more risk than they should?
If the uptrend breaks a decade uptrend has broken. It’s taken 2 years for the first swings of the break to complete. These swings are usually 3-5 times less than the overall crash in timespan. By the definition of trends a failure to follow through here could comfortable set the grounds for 5 - 10 year downtrend.
On the flip side of that, if the breakout is successful then BTC would have made a big crash and full recovery. All times but one it was a good idea to go long that with tight stops. Big things happened. One thing I would say if if this is a new trend leg, there should be a wave 2 correction to buy a dip.
I currently lean bear because we’re very close to resistance. The rates thing. SPX butterfly thing. The market cap thing. All the things.
It’s impossible for my contrarian nature to not thing this smells like an obvious rug pull setup.
I know I can control what I lose if I am wrong and get rewarded exponentially if right.
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At this point whatever happens in markets they’ve surprised me and nothing they do will surprise me. It is best to just make the breakout level plans to either side.
The bear signals are incredible, broad market, and even although they are I still feel in my heart now it’s not coming.
I’ve traded a lot of reversals and I know one should not expect to feel bearish at the highs. One should feel almost obligated to bet, and paranoid.
I’ve learned to tune out my thoughts and just trade the patterns. I’ve missed incredibly trads closing out at the last minute and the best trades in my life I’ve not really expected to work when I put them on. I know we can’t know the next swing - But I know a lot of things say if it’s down it’d be really hard this time.
If it’s going to be a signature swing break away trend, that’ll be easy enough to do well in.
I really do feel that rally is too expected though.