Hello everyone, hope you are keeping well and starting to enjoy the normalities of life again. One step at a time. I’ve had quite a few messages over the past 10 days so I thought it would be beneficial to clear a few things up and lay some worries to rest.
bitcoin has been on an absolute tear since September (the most recent red monthly candle) moving from 10 thousand dollars all the way up to 65 thousand just a couple weeks ago. As I was doing some homework, I came across that interestingly enough bitcoin in its 12-year lifespan has never printed seven consecutive green monthly candles. The likely red April candle is more than welcomed for the next move up. Again I think that it's important to reiterate that this is completely healthy price action in a bull market and nothing out of the ordinary.
In bitcoin’s 2017 bull run there was a total of seven pullbacks larger than 30% so far we have only had one in Janaury. Whether this is a sign of the cryptocurrencies maturity in becoming less volatile remains to be seen. This current pullback has reached a 27% re-tracement therefore leaving reason to beleive that it could get worse before it gets better. Especially, when factoring in that on a short enough time horizon the sellers are in control of the market this next week could be bearish lets take a look at a chart to see if it supports such claims.
The key points to review here are:
- Trading between $50,323 & $58,979 from March 3rd to until April 10th
- A fakeout (fake move before going the opposite direction) to the upside and printing new all time highs.
- Mass liquidation event on Sunday 18th with 1 million users being liquidated totalling in over $10 billion in losses. This event is the catalyst for the technical break we are seeing currently.
- Continued downtrend trading within previous range
- April 23rd seeing a breakout of the trading range to the downside of the $50,323 level
- Next support levels at $46,410 or $43,064 with the strongest level of support coming from Tesla’s bitcoin purchase announcement at $39,249
From the technical analysis it’s clear that a weak end to the month could be on the horizon. To those who may be newer investors or specifically to bitcoin itself I appreciate it may be hard to stomach and see a price of $39,249 so soon after reaching $65,000. However, this would only be a 39% pullback (at the time of writing at $50,000 is -27%) something that is completely ordinary in a bitcoin bull market and should be nothing to worry about.
History doesn’t usually repeat itself but it often rhymes.
The chart above displays bitcoin price action after an halving event (purple = 2013, green = 2017, blue = 2021, yellow = average between 13 & 17). This provides great insight into bitcoins cyclical nature — notice the sharp drop in price, followed directly by a vertical upwards movement in price and a sharp recovery. Is this a possibility to follow in our current scenario?
While reviewing the previous bull runs price action there was similar to the three pullbacks seen in February (25%), March (17%) and now April (27%). Similar was seen in May, June & July of 2017 with both making lower lows in the third pullback. This third pullback definitely has similarities to the current one in a sharp pull back, interestingly enough after bottoming out at $1,890 before recovering to $2,865 just four days later a more than 50% increase! I am also keen to add that this run resumed upwards until a level of $4,951 a further 73% after the recovery. Yes bitcoin is volatile and it can move as quickly down as it can up.
I really think that the key takeaway of being invested in an emerging technology, that is both loved and hated, is that price action will be volatile. It is never as bad as it seems just as, its never as good as it seems. Patience and a long-term time horizon we will see us through this turbunlant period. Relax. Have a pint. And let’s regroup in May.
Stay safe everyone