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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 465 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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Altcoins

Litecoin Price Analysis: LTC/USD Set for Another Potential Explosive Move North as Bulls Penetrate Pennant Pattern

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  • Litecoin price on Saturday is seen holding decent gains of over 3% at the time of writing, as the bulls continue their latest push north.
  • Fundamental prospects surrounding the Litecoin Foundation remain strong and supportive of the price recovery.

LTC/USD since last week has been on a decent push to the north; the price has gained well over 40% since 7th February. A breakout kicked-started the previous week after the bulls managed to escape a narrowing daily range-block. LTC/USD was contained within the tightening structure from 11th January right up to 7th February, which then saw an explosive move shortly after. In terms of the range, this was seen at a high of $35 down to a low $29.

Between 10-11th February, Litecoin managed to see its highest levels since 14th November, which demonstrated its recovery. Price action over the last few sessions has been somewhat consolidating while maintaining the new heights. As a result, LTC/USD has formed a bullish pennant structure following the long pole from 8th February gains. Given the current formation, the price does appear to be subject to further upside movements.

Adoption Progress – Litecoin

Earlier this week, Spend App announced iit would begin supporting Litecoin. The Spend App currently facilitates users to buy, sell and pay with Litecoin in more than 40 million locations, a massive step towards mainstream adoption. According to Spend’s official website, card transactions can be performed in 180 countries.

The company tweeted, “Litecoin is now available on the SpendApp. You can buy, sell and pay with Litecoin with your linked bank account. Spend LTC at 40+ million locations with the Spend Wallet by instantly converting to fiat with the Spend Visa Card!”

Pricing in Litecoin’s ‘Halving’

In August of this year, Litecoin is expected to see it’s second ‘Halving’. In a PoW, or proof of work blockchain, halving results in the miner’s reward being cut in half. Although the halving causes miners’ reward to be reduced, they tend to Bboost the price of an asset over the longer-term.

The inventor of bitcoin, Satoshi Nakamoto, introduced the halving feature to protect against inflation. Besides, he wanted to ensure that not all of the blocks were mined so soon. Similarly to bitcoin, Litecoin has a cycle of “halving”. What will happen is at predetermined blocks, Litecoin’s mining reward will reduce. It will be Litecoin’s second halving, as the first one occurred back on 25th August 2015. At the time miners rewards went down from 50 LTC to 25 LTC, this time round miners reward will be 12.5 LTC.

Technical Review – LTC/USD

LTC/USD daily chart.

As detailed earlier, LTC/USD is subject to an extended move higher should the market bulls breakout of the pennant pattern. The upper part of the structure can be seen tracking around $44.00; this must be broken down to see a more significant wave of buying pressure. Looking to the north, the next realistic target for the bulls will likely be the psychological $50.00 mark. The price has not been up at these heights since 14th November 2018.

In terms of support, it is observed at the lower acting trend line of the pennant structure, $41.50. If this fails to hold a complete reversal of the latest run of gains may be seen. LTC/USD would then likely be forced to return down to the low $30 region.

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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4.6 stars on average, based on 123 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

NEO Price Analysis: NEO/USD Bulls Eyeing an Explosive Move Higher as Cryptocurrency Enters Western Markets

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  • NEO/USD bulls are penetrating overhead resistance of a triangular pattern formation.
  • NEO Global Development (NGD) has set up an office in Seattle, Washington, keen to break into the Western markets.

NEO/USD: Recent Price Behaviour

The NEO price over the past week has managed to see some upside momentum, having gained around 25% since 7th February. At the time of writing, NEO/USD is running towards another session in the green, which would make it nine in the last ten. This is the best run of gains observed since the crypto market uptrend of December 2018.

In terms of the latest push to the north, NEO/USD bounced off a critical near-term supporting ascending trend line, which makes up a triangular pattern structure. It began the formation of this back in mid-December 2018 when the bulls entered a decent path of upside. However, the bulls eventually ran out of steam and were forced to narrow and trade within the confinements of the mentioned pattern.

NEO Looking to Make Ground in Western Markets

The team at NEO is taking serious steps towards expansion into U.S. markets, following its latest announcement to open an office in Seattle. This is the site of the new NEO Global Development (NGD) office. NGD will begin immediately recruiting for the new set up, which is going to be headed up by ex-Microsoft executive John deVadoss.

NEO is hosting its 2019 DevCon in Seattle, Washington between 16th February through to 17th. There is much anticipation around the announcing and details of NEO 3.0. As it currently stands, no clear specifications about the upgrade have been disclosed. Previously, NEO co-founder Erik Zhang said:

“NEO 3.0 will be an entirely new version of the NEO platform built for large scale enterprise use cases. It will provide a higher TPS and stability, expanded APIs for smart contracts, optimised economic and pricing models, and much more. Most importantly, we will entirely redesign NEO’s core modules.”

More on DevCon: NEO Price Update: Bulls Take Control as Anticipation for DevCon Builds.

Technical Review – NEO/USD

NEO/USD daily chart.

The NEO/USD price continues to trade within the earlier described triangular structure, demonstrating signs of late for a possible breakout higher. The markets bulls have been testing the upper acting trend line of the pattern; given the recent penetration, one would suggest a subsequent breach is likely. The resistance is currently tracking at $8.60; a break and daily closure above could invite another wave of buying pressure.

Further to the north, eyes would be on a retest of the significant psychological area of $10.00. The price last peaked up at these heights on 9th January, before running into sellers and being forced back south. At the time this was the highest NEO/USD had reached since 20th November. A push above this will then call into action $13.00, where the price consolidated briefly during the heavy November selling. Lastly, a return to the pre-November fall levels near $20.00 would be the next likely target.

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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4.6 stars on average, based on 123 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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Analysis

Crypto Update: Another Spike Fails in Crypto-Land

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The major cryptocurrencies continue to follow the pattern which consists of sudden spikes followed by choppy sideways periods. Today, the top coins jumped higher, with the strongest currencies testing their recent swing highs, but the move quickly failed. The market continues to be dominated by low liquidity and the bearish long-term forces, making it difficult to make money trading the long side.

That said, the short-term break-outs, which were formed one week ago, remain intact and our trend model is also on short-term buy signals in the case of the relatively stronger coins. Despite the buy signals, traders should remain cautious with new positions, as the long-term forces continue to work against bulls here.

The leadership of last week’s move continues to be weak and without a new batch of coins hitting new short-term highs, it’s hard to see what could propel the market higher. The top 3 coins haven’t been able to pull their weight either, so odds clearly favor the continuation of the bear market from a broader perspective.

BTC/USD, 4-Hour Chart Analysis

Bitcoin remains stuck below the $3600 level despite today’s spike, and the bearish drift that started last week in the coin continues. BTC’s relative weakness is a negative sign for the whole segment, and although it’s still above the support/resistance zone just north of $3450, the long-term setup continues to point of the $3250 and $300o support levels.

That said, the short-term buy signal is still in place in our trend model, and traders could open small, speculative positions in BTC, with strong resistance zones being ahead near $3850 and between $4000 and $4050.

XRP/USDT, 4-Hour Chart Analysis

Ripple has also been showing relative weakness in recent days, and today it dipped back below the key $0.30 support/resistance level following the failed rally attempt. While the coin once again avoided a move towards the next main level of interest at $0.28, it is still likely to violate that level and test the August low near $0.26.

With that in mind, traders should stay away from XRP, with our trend also being on short- and long-term trend signals, and barring a move above $0.32, the immediate outlook is also negative, with further resistance levels ahead near $0.3550 and $0.3750.

Litecoin Tests $44 Level Again as Ethereum Clings to $120

LTC/USD, 4-Hour Chart Analysis

After settling down near the $41 price level, last week’s star LTC spiked as high as $44 today, but it failed to break-out above the key resistance zone. While the break-out remains intact and the MACD indicator still only points to a correction, the market-wide trends remain negative, and the previously leading coin hasn’t shown signs of relative strength in the last couple of days.

Traders could still hold their positions here even though a swing low is not yet confirmed, but strict rsik management rules should still be applied. A move back below $38 would trigger a downgrade in our trend model, which is still on a short-term buy signal. Above the initial resistance at $44, further levels are ahead near the recent swing high near $46 and at $51, while support below $38 is found near $34.50 and between $30 and $30.50.

ETH/USD, 4-Hour Chart Analysis

Ethereum has been trading in a narrow range today and the recent short-term swing high capped the rally attempt in the second largest coin. While the coin is still holding on to most of its gains from last week, trading well above the $112 level, the lack of bullish follow-through is a negative sign even regarding the short-term outlook.

The hostile long-term setup raises the odds of a failed short-term rally, and although pour trend model remains on a short-term buy signal, traders should only consider small, speculative positions here. The $120 level continues to be at the center of attention, with another strong resistance above that being found near $130, while further support is found in the $95-$100 zone.

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 465 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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