BITCOIN THE KING -The Bigger Picture
Hello everyone, rouzwelt here
This post may be a little more longer than my usual posts, so bear that in mind as I'm going to take a look at macro picture and fundamentals of Bitcoin and Crypto Market. Let's begin by going back to the beginning of the global pandemic, maybe one of few phenomenons that had the ability to change the world structure in every dimensions and when it started to impact the financial space and global economy, many were speculating about a long recession as a lot of 1st world countries like USA (I'm mostly focused on U.S. as it has the biggest economy and U.S. Dollar is the global reserved currency) were already in deep prolonged financial struggles, after all that could have been a fairly good chance to fix some structural issues, but you may know even better than me, they came up with the solution which it is the reason behind creating those problems in the first place. QE plans and money printing have gone wild since then, and all those crashes in stock, crypto and other financial sectors resulted by economy shutdowns where quickly recovered, but at what cost? The whole thing just grew the existing bubble even bigger and it's just a matter of time before it pops, but that's necessary if you'd like to see a healthy economy again.
Handing out all those stimulus money to people who don't even need them as well as all that free time caused by shutdowns drove many to markets like crypto as they had all these free money and time to spend on such speculative assets. You should factor Bitcoin halving too, happening on that period in time and as we know, it is a catalyst for Bitcoin to take off and when Bitcoin takes off the whole crypto market follows. We had bullish news day after day as Bitcoin was breaking its ATH again and again, many were FOMOing in and talking about 100/200K+ BTC by the end of the 2021.
Well we can say that's not the case for many of those 100K+ guys anymore, as we started to see lack of buyers and demand in 60k area. We all need some dose of reality every now and then as nothing can rise in straight line up in short period of time. Many talk about the institutions that are in BTC and believe that because they are in, price can't dump lower than certain levels. Well you need to ask yourself how many institutions are in? how many of S&P500 institutions are in? They're not a lot of them and retail doesn't have enough power to pump an asset beyond a certain level. In fact we saw big bullish news coming everyday when BTC was at top but the whole price action was sideways and we didn't see much happening. And that shows us that demand was fading away. You can't expect Bitcoin and crypto to just go up from now on cause they are printing dollar like crazy, as the market size is not comparable, there still is huge interest in U.S dollar.
I want to point out something here, many new comers think that we all are going to be rich entering crypto, but that's not how it works, actually trading is more of a zero-sum game, whales institutions and smart traders need these new people in order to lock in their profits, they need them to buy the top so they can sell, and in crypto theoretically you always need a buyer willing to pay you a higher price than you have paid as crypto doesn't have any intrinsic value by itself, and price can dump massively if HODLers stop HODLing.
From mining perspective I should note that, the gains in these months were crazy, I am a miner myself and I find it crazy how much a shitty ASIC miner could have mined during that period, these miners became profitable after this bullish run which is ridiculous. Look at GPU market, prices are insane, and this is causing an unbalanced situation in mining manufacturing industry, the mining devices are way over-priced and that can't be sustainable, eventually they should come down as a result of Bitcoin price falling, or at least the amount of mining farms grow to an extent that the prices get balanced again, and the former is more achievable at this moment in time.
Now let's take a look at the chart, below is weekly timeframe of BTC in log format, and as you can see price was moving inside the channel since the global pandemic started, right now price has broken below the channel, and if we get the weekly close below the channel then it would be confirmation that the channel is invalid, what can happens after that is difficult to say, we might consolidate for a long time in the current range of 30/40K and we might dump to lower levels. But I want to say that in my personal opinion higher levels seem the most unrealistic one among these probabilities. I'm not ruling it out completely out of the picture though, but even if BTC manages to head higher at this stage, I believe it can't hold that for very long and would be unsustainable, that's because we need new money, new buyers entering. Look at Micro Strategy for example, last week it came up with a news that they are planning to buy huge amount of Bitcoins, they managed to fill their order at almost 37k in average, but what happened after that? price actually dumped. This news would have pumped the price massively if it had came before May 2021, and try to think it this way, now they can be a catalyst for a bigger crash if BTC falls below a certain level (24K), if their shareholders begin to withdraw some their investments, cause they are in huge debt and they should sell some their BTC to pay them in cash.
We see a lot of bullish news coming everyday, but yet we don't see that reflecting in the chart, and that's simple, there are just not enough buyers at this point, and that takes time to change, as there are cycles in the market, we can't go straight to the moon, get that out of your head for your own good. We may never see a blow off top in Bitcoin like 2017 as that's the main talking point of many pointing it out every time: "we have not had a blow off top so the bull run isn't over yet", well if that's the main talking point, you know how this works, if everyone expects it then it never happens, as well as a dead cat bounce. You should not expect anything to happen, that's not how it works.
Lastly I want to point out an interesting action which is happening in the chart since the start of the bull run, for the first time since then, we are seeing the volume increase at rally down in weekly chart and decrease of volume at reaction, that's an early indication of momentum shift in the market. We can see more supply entering the market and I believe many of those lucky guys who bought BTC below 15K, are starting to book some profit now as they have missed the 50/60k range and don't want to miss this range too.
Anyway it's hard to predict where the price might end up in mid-term, where ever it goes you better have a plan, but if you are here for the long run and you don't mind waiting 5 or more years then you'll be fine cause long-term I'm still bullish, although I know that in short to mid-term BTC can head to lower levels, but I also know that there is still a long road ahead for crypto market and there are a lot of buyers who would enter this market as it is growing and that's what the market needs, new money, new adaptions, new institutions, and that certainly takes time, so don't lose your belief in the value it adds to our lives.
I hope this would be helpful and if you have found something useful in this post then feel free to support me by a like and share, and write a comment if you have anything to say, I'd appreciate that a lot. Have fun and trade safe.
This post may be a little more longer than my usual posts, so bear that in mind as I'm going to take a look at macro picture and fundamentals of Bitcoin and Crypto Market. Let's begin by going back to the beginning of the global pandemic, maybe one of few phenomenons that had the ability to change the world structure in every dimensions and when it started to impact the financial space and global economy, many were speculating about a long recession as a lot of 1st world countries like USA (I'm mostly focused on U.S. as it has the biggest economy and U.S. Dollar is the global reserved currency) were already in deep prolonged financial struggles, after all that could have been a fairly good chance to fix some structural issues, but you may know even better than me, they came up with the solution which it is the reason behind creating those problems in the first place. QE plans and money printing have gone wild since then, and all those crashes in stock, crypto and other financial sectors resulted by economy shutdowns where quickly recovered, but at what cost? The whole thing just grew the existing bubble even bigger and it's just a matter of time before it pops, but that's necessary if you'd like to see a healthy economy again.
Handing out all those stimulus money to people who don't even need them as well as all that free time caused by shutdowns drove many to markets like crypto as they had all these free money and time to spend on such speculative assets. You should factor Bitcoin halving too, happening on that period in time and as we know, it is a catalyst for Bitcoin to take off and when Bitcoin takes off the whole crypto market follows. We had bullish news day after day as Bitcoin was breaking its ATH again and again, many were FOMOing in and talking about 100/200K+ BTC by the end of the 2021.
Well we can say that's not the case for many of those 100K+ guys anymore, as we started to see lack of buyers and demand in 60k area. We all need some dose of reality every now and then as nothing can rise in straight line up in short period of time. Many talk about the institutions that are in BTC and believe that because they are in, price can't dump lower than certain levels. Well you need to ask yourself how many institutions are in? how many of S&P500 institutions are in? They're not a lot of them and retail doesn't have enough power to pump an asset beyond a certain level. In fact we saw big bullish news coming everyday when BTC was at top but the whole price action was sideways and we didn't see much happening. And that shows us that demand was fading away. You can't expect Bitcoin and crypto to just go up from now on cause they are printing dollar like crazy, as the market size is not comparable, there still is huge interest in U.S dollar.
I want to point out something here, many new comers think that we all are going to be rich entering crypto, but that's not how it works, actually trading is more of a zero-sum game, whales institutions and smart traders need these new people in order to lock in their profits, they need them to buy the top so they can sell, and in crypto theoretically you always need a buyer willing to pay you a higher price than you have paid as crypto doesn't have any intrinsic value by itself, and price can dump massively if HODLers stop HODLing.
From mining perspective I should note that, the gains in these months were crazy, I am a miner myself and I find it crazy how much a shitty ASIC miner could have mined during that period, these miners became profitable after this bullish run which is ridiculous. Look at GPU market, prices are insane, and this is causing an unbalanced situation in mining manufacturing industry, the mining devices are way over-priced and that can't be sustainable, eventually they should come down as a result of Bitcoin price falling, or at least the amount of mining farms grow to an extent that the prices get balanced again, and the former is more achievable at this moment in time.
Now let's take a look at the chart, below is weekly timeframe of BTC in log format, and as you can see price was moving inside the channel since the global pandemic started, right now price has broken below the channel, and if we get the weekly close below the channel then it would be confirmation that the channel is invalid, what can happens after that is difficult to say, we might consolidate for a long time in the current range of 30/40K and we might dump to lower levels. But I want to say that in my personal opinion higher levels seem the most unrealistic one among these probabilities. I'm not ruling it out completely out of the picture though, but even if BTC manages to head higher at this stage, I believe it can't hold that for very long and would be unsustainable, that's because we need new money, new buyers entering. Look at Micro Strategy for example, last week it came up with a news that they are planning to buy huge amount of Bitcoins, they managed to fill their order at almost 37k in average, but what happened after that? price actually dumped. This news would have pumped the price massively if it had came before May 2021, and try to think it this way, now they can be a catalyst for a bigger crash if BTC falls below a certain level (24K), if their shareholders begin to withdraw some their investments, cause they are in huge debt and they should sell some their BTC to pay them in cash.
We see a lot of bullish news coming everyday, but yet we don't see that reflecting in the chart, and that's simple, there are just not enough buyers at this point, and that takes time to change, as there are cycles in the market, we can't go straight to the moon, get that out of your head for your own good. We may never see a blow off top in Bitcoin like 2017 as that's the main talking point of many pointing it out every time: "we have not had a blow off top so the bull run isn't over yet", well if that's the main talking point, you know how this works, if everyone expects it then it never happens, as well as a dead cat bounce. You should not expect anything to happen, that's not how it works.
Lastly I want to point out an interesting action which is happening in the chart since the start of the bull run, for the first time since then, we are seeing the volume increase at rally down in weekly chart and decrease of volume at reaction, that's an early indication of momentum shift in the market. We can see more supply entering the market and I believe many of those lucky guys who bought BTC below 15K, are starting to book some profit now as they have missed the 50/60k range and don't want to miss this range too.
Anyway it's hard to predict where the price might end up in mid-term, where ever it goes you better have a plan, but if you are here for the long run and you don't mind waiting 5 or more years then you'll be fine cause long-term I'm still bullish, although I know that in short to mid-term BTC can head to lower levels, but I also know that there is still a long road ahead for crypto market and there are a lot of buyers who would enter this market as it is growing and that's what the market needs, new money, new adaptions, new institutions, and that certainly takes time, so don't lose your belief in the value it adds to our lives.
I hope this would be helpful and if you have found something useful in this post then feel free to support me by a like and share, and write a comment if you have anything to say, I'd appreciate that a lot. Have fun and trade safe.
Penerbitan berkaitan
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.