Chill, it’s just a trendline retest/bear-trap/whatever you call it
BTC nosedived from high $8,000s this week, and tapped $7,000, a drop of around 20%. Altcoins and ETH mirrored the BTC decline.
If you were new to the crypto market, you will probably have panicked and started Googling for the latest updates on Bitcoin or Ethereum. And you probably would have landed on some version of the news claiming one of these:
- Xi’s bullish sentiments on crypto around a month ago were overhyped, and prices are crashing because China is clamping down on crypto, yet again.
- Facebook’s Libra could not live up to expectations, and many other partners are now exiting, causing negative sentiments on cryptocurrencies.
- Positive market sentiments to the impending “end” of the trade war spells positivity for the US stocks, which means capital will be moving towards the equity markets instead.
And the list goes on…
You see, while there are probably some correlations and effects that these news and happenings have on crypto, there is no need to worry about the decline, if you can see the ways that crypto will enact in future.
And when you do, you will probably see this dip as a buying opportunity rather than a cause for panic.
Depending on your point of view, crypto works in many ways. Just buy some and you’ll get it – it just works.
Crypto as a daily currency
There are a ton of articles and books out there that explain how cryptocurrencies can function as a better currency or store-of-value than assets and fiat. *In fact, I even wrote one.
While the potential is there, remember that we are in the early stages, so crypto is still too volatile, not user-friendly for the layman, susceptible to hacks and scams, and scalability and privacy issues are still being resolved.
Crypto as a tradable asset
If you plan to give trading crypto derivatives a shot, please learn the technicals and basics of trading before jumping in.
Long story short — ignore the uses of crypto, assume they have some use, and watch how the crypto trading markets work as a game where traders vie to outdo each other just to make a living.
Crypto as an investment
Most people who have entered in 2017 would have got burnt and learnt their lessons. Some, like me, are still foolishly in the game.
For me, it is quite clear. Look at the developments in the space, that has continually sustained despite the market movements. Then, look at the potential uses of cryptocurrencies in many different ways.
In investing, we look at risk and rewards. If I were to invest in an asset, what is the upside potential i.e. how much can it rise? To me, most US stocks are already at a premium i.e. I am too late to the game, which is fine. Skip ETFs because that is just bundling a bunch of top-performing stocks so that it appears less risky, when in fact, you are still buying into the respective stock markets.
Then, consider the risks involved. If I am looking for dividends, I would stick with fixed-income assets that bear lower risks, considering how late in the market cycle we are at now. Hence, I’m passing on stocks.
That is how and why I am invested in crypto, but that may not be for you. We all have differing beliefs and investment methodologies, so you should just do you.
Nevertheless, if you are keen to explore cryptocurrencies as an investment, here are some ideas on how you can take it forward.
- Read up and understand crypto so you would not be that affected by stories published in the media.
- Learn technicals, or adapt your technicals for the crypto markets.
- Learn basic risk management strategies. Otherwise you will be at a loss whether the market goes on a bull run or dips greatly.
As for where the crypto market is headed next? Well, we are at a strong support region, where you can probably see that we are retesting the upwards sloping trendline, and the 61.8Fib level.
That is not to say that we will not head lower. We can plummet to the next support region, where the 78.6Fib lies, and retest the 200MAs. And these retested levels are important, for the market to move further upwards.
You see, chart reading is just part of the game. You have to have entry and exit strategies to even make some gains from the game. If these sound too complicated for you, may I suggest then to just sit back and watch the beautiful game unfold; it will be quite a sight.