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Long-Term Bitcoin Analysis: Where is BTC from an Investment Standpoint?

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After Bitcoin’s latest sell-off, which took the most valuable coin down by 30% in two weeks, the question arises that is it still in a bull (rising) market or a bear (falling) market. Easy question, right? Well, not so much, as it all comes down to what time-frame we are talking about.

To spoil the answer, from a long-term standpoint, we are still in a rising market, meaning that odds favor higher prices ahead in the coming months. To be frank, in traditional asset classes, following a 70% decline like the recent plunge in Bitcoin, people would think that we are out of our minds to say that it is still a bull market (in stocks -20% is already considered bear market territory), but traditional assets don’t usually rise 20 times in a year too.

Also, for a lot of traders and investors, the less than three-month long downswing already qualifies as a long bear market, so we don’t want to argue on definitions, let’s just look at what matters; how should you navigate through the current market, and why we think that this is still likely a bull market.

A side-note: For context, reading our article from December on the nature of the late-2017 run-up could be useful.

A Weekly Look

BTC/USD, Weekly Chart

Looking at the plain weekly chart of BTC, the recent decline is nothing more than an overbought consolidation pattern, with no major support level broken. Of course, we understand that a weekly chart in crypto world is a bit too much, and very few investors base their decisions on it.

Your humble analyst also bases his investment decisions on the daily and 4-hourly charts, but for perspective, it’s good to take a look at the really long-term chart from time to time.

The Daily Chart

BTC/USD, Daily Chart Analysis

Let’s move on to the daily chart, where the structure of the 2017 bull run is clearly visible. Here, the weekly consolidation is a more structured correction (or corrective bear-market, as you prefer), but to place it in context, it only erased around one month of preceding gains. That is how extreme the 2017 run-up was, and that has both positive and negative implications for the future.

The positive is that all that happened in the last three month is that BTC pulled back after a huge rally- even if it was a 70% pullback…- with only the two steepest major uptrend lines of the run-up being broken, as of now. So, we arrived to the explanation of why we still treat BTC as a bull market, but when would that change?

Examples of Previous Post Run-Up Markets

Here is the catch though, as if you read the article that we already quoted, these kinds of speculative run-ups often lead to long and grueling corrections or bear markets, and right now we simply don’t know if one is already started or not.

Bitcoin’s 2013 Surge and the Subsequent Bear Market

We don’t have to go far away from BTC to see how those look like, just look at Bitcoin’s 2013 rally and the following bear market. Of course, that was a completely different universe, but you get our point.

Ethereum’s 2017 Run-Up and Correction, 4-Hour Chart Analysis

Also, Ethereum had a similar run-up in 2017 (seen on the chart above), that was followed by a 5-month consolidation, which is actually very similar in structure to Bitcoin’s current pattern since December.  And then again, there is the Nasdaq which only recovered its 2000 highs recently, after almost 20 years…

So which one will it be?

Hindsight Bias and the Limits of Technical Analysis

The answer is that we don’t know for sure. Why? Because of the limits of forecasting, and more precisely technical analysis.

No approach will work all the time, no analyst or guru will call every top and bottom and trend, not even close. Imperfection is an inherent part of investing, as we are dealing with probabilities, events in the future that can’t be predicted.

While looking at price charts, a vast majority of people fall into the trap of hindsight bias, meaning (in this case) that just because something happened in a way means that it was meant to happen that way.

That’s a false and very dangerous assumption, because if you project that to the future, you will think that you, or I or anyone else knows what will exactly happen. Don’t get me wrong, on the long run, you can have an educated and highly likely prediction of where cryptos or other assets will be, but short- and mid-term, the best you can do is to gauge the probabilities.

What’s Next for BTC?

That’s how we will deal with Bitcoin’s current situation. So until we are above the first major long-term support zone, in the $5000-$5600 area, we (and our trend model) will assume that we are in a bull market and new highs are ahead.

As the coin will get short-term overbought, and investors will be advised to buy again (as it was the case from the 2nd of February up until $11,500).

Below that zone, our model would switch to bear market rules (even as the secular trend would still be intact) and be generally more defensive, until the declining trend is intact.

Once again, we are still not in bear market territory, but let’s see a guide for the most important strategies.

Strategies in a Bear Market (If that is Ahead)

What does that mean for you? It depends on the strategy that you apply, but let’s see the main strategies that we advocated previously.

  • Buy and hold, without caring about day-to-day (or even month-month) fluctuations
  • Buy and hold a core position and add on the major dips; a very powerful strategy
  • Buy a certain amount every week or month, and even-out your entry price, without the hassle of timing the market
  • Try to catch major turning points to reduce and “re-boost” your position
  • Trade short-term movements with stop-losses, targets, and strict risk management (this is trading not investing)
  1. The strategy wouldn’t change at all for those averaging in the investment, the third strategy in the list.
  2. Buy and holders who believe in the future of BTC shouldn’t care about bear markets, as they supposedly hold the coin for years and years, and if they think that the valuation is low enough they should buy more.
  3. Buy and hold with a core position: here the most important change is that you should prepare that the steady string of new all-time highs will stop until the bear market lasts. Also, the risk of selling everything near the bottom, given the panicky sentiment in those moments is very high.
  4.  (and 5.) Those trading cryptos or trading “in” to their holdings (the last two strategies) should be aware that bear markets are much harder to trade, with high volatility, violent sell-offs and feel good rallies that eventually fail. Reducing position sizes and applying stricter risk management is advised.

We will keep you updated daily as always, and as for altcoins, we will publish our long-term outlook for the majors during the weekend. Stay tuned.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 418 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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2 Comments

2 Comments

  1. jf5585

    March 16, 2018 at 1:20 am

    Really good article. Thank you

  2. Tarik

    March 16, 2018 at 10:13 am

    excellent article, thanks Mate!

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Analysis

5 Things To Watch Next Week + ChartBook

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Last Fed Rate-Hike of the Cycle?

EUR/USD, 4-Hour Chart Analysis

The Federal Reserve will announce its rate decision on Wednesday, and according to the consensus on Wall Street, the central bank will deliver the fourth rate hike of the year. The huge shift of the last couple of months in the US bond market means that now, no additional tightening steps are “priced in” for 2019.

The bearish shift in global stocks and the mounting evidence regarding a global economic slowdown confirm that view, but we still have doubts about the intentions of the Fed. While it’s true that yield curve is about to invert and the global slowdown will eventually affect the US economy, for now, the numbers remain solid, and the Central Bank might use these conditions to raise rates further in order to have “firepower” in the case of a recession.

That could fuel another strong leg higher in the USD, but in any case, the foundations of the Dollar’s rally are still strong, with the record deficits only affecting the currency’s long-term outlook in our view. Even if a stronger pullback is still possible, we expect new lows in the EUR/USD and new highs in the Dollar index in 2019.

China in Focus as Economic Slowdown Accelerates

Shanghai Composite Index CFD, 4-Hour Chart Analysis

This week’s Chinese economic releases were quite scary for bulls, as both Industrial Production and Retail Sales missed by a mile, which is unusual in the history of the country. The Chinese stock market has been one of the first to enter a bear market during the broad bearish shift, and even though a trade deal with the US got closer, equities failed to rally substantially off their lows.

The Chinese Yuan is also very close to its lows, and should the slowdown further accelerate, the country’s financial system and the currency could get under heavy pressure given the extent of the credit bubble of the past years. With that in mind, the fate of the Chinese market is crucial for risk assets globally, and a break below the prior lows would be another nail in the coffin of the US bull market as well.

Another Big Week for the Pound

GBP/USD, 4-Hour Chart Analysis

The Brexit chaos pushed the Great British Pound to its lowest level since early 2017 against the USD, and from a technical perspective, we could be looking at a test of the 1.20 level in the near future. Looking at the possible outcomes of the Brexit saga, a new referendum, a no-deal Brexit, or a renegotiated deal, uncertainty is extremely high, and unless the May-government finds a quick solution, further steep losses are likely ahead for the currency.

Several key economic releases will also be coming out next week, such as the CPI and PPI indices on Wednesday, the final GDP and the Current Account balance on Friday, while Thursday’s Retail Sales report be out just before the Bank of England’s rate decision, so forex traders could be in for another very active week in the Pound-related pairs.

Financials Signaling Trouble Across the Globe

XLF, 4-Hour Chart Analysis

The month’s most interesting market trend is the plunge in financial stocks, which continued unabated even as trade war fears subsided somewhat. The pressure on the major European banks has been apparent for a while now, and as the quantitative tightening is gaining speed, their US peers also got hammered in December. Some analysts point at the excesses of the leveraged loan market and the collapsing yield curve, but most likely the funding squeeze is at the root of the problem.

The XLF ETF firmly entered bear market territory and fell to its lowest level since mid-2017 this month, and although the broad rising trend remains intact in the sector, given the global technical picture, we would only look for short-term long positions. We continue to view all rallies as selling opportunities in equities, and the fact that more and more crucial sectors confirm the downturn is another bearish sign.

A Slew of Key Economic Releases on the Last Full Week of the Year

We will have a busy regarding the global economy even besides the Fed meeting and the British releases, with the US and Canada providing the most important indicators. The German IFO index, and US Building Permits and Housing Starts will highlight Tuesday’s session, the Canadian CPI will be out on Wednesday, followed by the Australian Employment Report and the BOJ’s rate decision on Thursday.

The Canadian GDP and Retail Sales will be released on Friday, and the US Durable Goods report will also be out, and following several months of disappointments, a positive surprise could cause a jump in the Dollar, especially we will have a hawkish surprise delivered by the Fed.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

 

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 418 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

Tron Price Analysis: Fundamentals are Stronger than Ever; TRX Bulls Staging Comeback

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  • Tron network has breached over 100 million transactions, as reported by Justin Sun.
  • Zero transaction fees are anticipated on the Tron ecosystem, by Friday 21st

TRX/USD has remained generally soft since the 29th November. The price has been cooling and ranging since its spike higher at the back end of November. TRX is remaining well supported within a near-term acting demand zone. This has been in action since 20th November, providing necessary comfort, to prevent a free-fall below the 1 cent mark.

Despite this described technical behavior, the fundamentals surrounding the Tron foundation remain very strong indeed, as the founder Justin Sun likes to keep the community up to date with all the latest via his Twitter feed. There seemingly being much promise surrounding Tron’s daily activity and transactions.

Tron Hit 100 Million Transactions

Sun, took to his Twitter account today, to announce that it had recorded 100 million transactions. He said, “TRON has reached 100 million transactions today.” Sun provided a screenshot of the Tron platform, which showed the number of transactions had in fact breached the 100 million mark.

100 million transactions

Over 2 Million Daily Transactions

Previously, he had boasted how the Tron network continues to breach records with its daily transactions, tecently having well and truly smashed through the 2 million mark. One community member, which Justin Sun retweeted, provided a comparison of Tron’s daily transactions, versus its peers: “TRON’s new record of 2,64 million daily transactions in comparison w/ the Top 5; 9.6 times more than Bitcoin’s 275k, 4.6 x Ethereum’s 567k, 4.1 x Ripple’s 633k, 188 x Tether’s 14k, and 264 x Stellar’s 10k.”

Zero Transaction Fees Coming Soon

Elsewhere, Justin Sun had posted something via the Tron community on his Twitter. This detailed, “The transaction fee of TRXMarket has dropped to 0.1% at 07:00(UTC) on Dec 14th! And 0 transaction fee will be realized by next Friday.” Given this, the ecosystem may see zero transaction fees by Friday 21st December.

Technical Review – TRX/USD

TRX/USD daily chart

Looking to the upside, should the bulls maintain this current course of momentum, TRX/USD could be in for decent gain. Firstly, resistance in a prior acting demand zone must be broken down for greater moves north. This can be seen tracking from $0.01600 up to $0.01800. As mentioned, this area had previously been supporting TRX/USD from August right up until November. Given the length of acting demand, it may prove a challenge breaking down.

TRX/BTC daily chart

Lastly, TRX/BTC is heading towards an extremely critical and game-changing zone. An area where the price faltered in August and October. As can be observed via the daily chart view, there appears to be some chunky sellers camped here. As a result, on each occasion, this region sent the price free-falling back down to the south. A clearance above will see a large renewed wave of buying pressure come back into play.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 87 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Altcoins

Litecoin Price Analysis: LTC/USD E­­­njoys Double-Digit Gains as Lightening Network Seen Imminent

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  • Litecoin has run higher by 20% over the past three sessions.
  • The community of Litecoin is very much excited about the upcoming activation of the Litecoin Lightening Network.

The Litecoin price is currently enjoying a bull run, running at its third consecutive session in the green. LTC/USD having gained a whopping 20% to the upside after producing another bottom area around the $22 territory.

Prior to this push higher being observed, LTC/USD had been moving within a tight range, after bottoming on 7th December. It initially appeared to be subject to another extended move to the downside, given the formed range-block.

Litecoin bulls still need to breakout from this mentioned formation. The low as detailed above is seen down at $22. The upper part of the range can be observed up within the $27 territory. To avoid another bear attack near-term, this must be breached.

Litecoin Lightning Network Imminent

Earlier this week, cryptocurrency exchange, CoinGate, did announce via witter that the Litecoin Lightning Network is now ready for its deployment. CoinGate also put itself up for hosting for the activation to take place on their platform. The exchange tweeted: “Litecoin community, we bear some exciting news! Our Litecoin LightningNetwork is ready to be deployed and will soon be live on CoinGate! Keep up with the news as we’re getting closer!”

The Litecoin founder, Charlie Lee, responded: “Even Litecoin will soon have more than 1000 merchants accepting LN payments! Thanks CoinGatecom!” Lee recently spoke about the Lightning Network, where he detailed how it is a second-layer solution for payments that go through Bitcoin and Litecoin.

Technical Review – LTC/USD

LTC/USD daily chart

As touched on earlier, the key for greater upside is to see a break out from the mentioned range-block. The bulls must storm through the $27 territory. However, not long after there is another barrier in the way. LTC/USD, between the 25th November and the 5th December, was in a prior range-block. The bottom for this was seen around $27 up to $29, which was a very short-term demand area. A push above this zone should pave way for a fast return back towards $50.

LTC/BTC Daily Chart Review

LTC/BTC daily chart

In the latest run to the upside for Litecoin, it has moved to its highest levels seen since 1st December. There is a key near-term barrier being eyed around current levels. A descending trend line running from the start of August is observed. The bulls must force a daily close above this resistance to see a further wave of buying pressure.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 87 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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