Has Bitcoin made an unlikely friend?
So Bitcoin is down about 60% since hitting highs of nearly $20k just a few weeks ago.
Day after day, each candle looks wider and more violent than the previous one.
There is absolute panic amongst people who have never experienced such a dip in any market, yet alone a “new” market such as cryptos.
The question on everyone’s lips is:
What on earth do we do now?
Crypto fans fall into four categories:
- Those who got on-board the train early and are looking for $100k.
- Those who missed out and are looking to get in.
- Those who got in at the wrong time and have seen nothing but red.
- Those who are just watching because they have absolutely no idea what to do.
I myself have one foot in the second camp and the other in the fourth.
I took time out as January was ending to see what my options were and what options are available to people who may already have a position.
This is easily the most annoying term I’ve come across in my entire life.
However, “hodling” (or holding) is not as stupid as many people online are suggesting.
If you have a longer term view of cryptocurrencies as a whole and think that there is a legitimate place for them in society, then one of the options available to you is simply doing nothing.
I’ve heard a number of people compare Bitcoin to the S&P (laughable, I know) and they are of the opinion that long-term, the price of Bitcoin can only go up.
Thinking like a long-term value investor and not checking the price of Bitcoin is definitely the way forward if you’re a hodler.
Wait for price action
At the end of the day Bitcoin is a market and there is no reason as to why technical analysis doesn’t apply to Bitcoin or other cryptocurrencies.
One of the best ways traders have made money whilst trying to get into a longer term bullish swing move is to wait for bullish price action.
I recently wrote an article about my top five technical plays and how I trade them.
All five patterns can be used to wait for bullish “confirmation,” and then executed based on whatever your view is of cryptocurrencies.
Now that may be “long all the way to $100K,” or simply looking to make money by fading this sharp downwards move.
Just trade it
I’ve mentioned a few times since the end of last year that cryptocurrencies, especially Bitcoin, seem to be trading like a “normal” market.
This is still the case and as I said above, there is no reason as to why conventional technical analysis can not be applied to the cryptocurrency space.
I’ve found that in sharp pullbacks Bitcoin has, so far, respected the 61.8% Fibonacci level (the level has acted as strong support and has seen price bounce aggressively off of it – who’d have thought these two would end up being friends).
Many people initially viewed Bitcoin as a “long only” market and rightly so.
However, two-way trade certainly appears to be the way forward.
On one side you have people looking to get long, and on the other, people who didn’t sell above $10k trying to liquidate their positions.
Take advantage of the liquidity on both sides and trade away!
If you were late to the party and bought Bitcoin above $10k you’re probably not feeling to good about your position right now.
The hallmark of all good traders is knowing when to get out.
Depending on how much money you have on the line, it may be a good idea to consider cutting your losses, getting out of your position and then re-evaluating whether your original trade idea is still valid, needs adapting, or even needs binning.