Bitcoin Update: Transition from Depression to Disbelief

Based on market cycle psychology, depression is the state where people have lost all hope in the market. They believe that the downtrend is a bottomless pit and the market will never again reach its former glory. This discourages everyday investors from entering the market when in fact, this is the point of maximum financial opportunity. Time and time again, markets bottom out when ordinary people have abandoned them.

This is exactly what we’re seeing in Bitcoin (BTC/USD). The hype that surrounded the cryptocurrency almost a year ago is completely gone. The interest over time, when looking at google trends, is at its lowest in 12 months. More importantly, many people believe that it can go significantly lower.

Current market sentiment maybe depressive but the charts show that the end is almost near. In this article, we show how Bitcoin may be transitioning from depression to disbelief.

A Comparison of Market Cycle Psychology Chart and Bitcoin Chart  

Disbelief is the state where the market shows signs of life but participants ignore them. They do so because they think that the downtrend is not yet over and the rally is just another pump and dump scheme to slaughter newbies.  

We believe Bitcoin is getting ready to make you a non-believer. To understand why we have this point of view, allow us to first show you the market cycle psychology chart.     

Market cycle psychology chart (Source: Steemit)

Disbelief comes after a boring and depressed market. If you’ve been following Bitcoin’s price action since September, you’d know that the past few months have been the longest. Volatility has been almost non-existent. There were times when Bitcoin traded within a $10 range. At that point, we knew that Bitcoin was in a state of depression.

If you’re skeptical, the next chart should help alleviate your concerns.

Bitcoin daily chart over market cycle psychology chart

We overlayed the Bitcoin daily chart on top of the market cycle psychology chart and we have an almost perfect representation of market sentiment over the last twelve months.

Currently, the market is so depressed that it is flatlining. This is not a bad sign. On the contrary, we believe that it is the deafening silence before the loud roar. We have the charts to back up this view.

Inverted Chart Resistance Confirmed

On November 2, we published an article showing that bears are exhausted. In that piece, we introduced the inverted Bitcoin chart and revealed how it broke out of the rising wedge. Back then, however, we needed a confirmation. Bitcoin must successfully complete the retest to validate the breakout.

It looks like the confirmation is in the bag.

Inverted chart of BTC/USD

Bitcoin firmly rejected the candle when it tried to reclaim the support. On top of that, the bounce was so weak that it failed to touch resistance of $6,150. These price movements appear to be the prelude of a waterfall event. This inverted chart will go down and when it does, it will go down hard. This is why we believe that the prelude that we’re in right now is the transition from depression to disbelief.

Bears Have Tapped Out

Another solid reason why we believe that Bitcoin is preparing for a strong bounce is that bears have given up. They waved the white flag and are looking to hibernate for the foreseeable future.

Looking at the BTC shorts chart (BTCUSDSHORTS), it appears that bears have abandoned their posts. They have flipped three crucial supports into resistances. Even if a bounce is in order, it will likely be far from a mighty roar. We expect it to be nothing more but the final whimper of a dying animal.

BTC Shorts

Bottom Line

Bitcoin may be flatlining now but we believe that it is the silence before the roar. With bears tapping out, it is only a matter of time before bulls take the stage and rampage with a vengeance.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.