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Is bitcoin heading for a ‘wildcard’ correction scenario?

Is bitcoin heading for a ‘wildcard’ correction scenario?

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Leading Trader Alessio Rastani explores alternative scenarios – knowing that when ‘everyone’ thinks something is going to happen, it rarely does.

 

There has been a lot of talk recently about where this corrective move for bitcoin might end, and what could happen next. Broadly, traders are in agreement. There has been lots of analysis that looks to the futures gap at $8,500, with support at the 100-day moving average not far off that. Take Max Keiser’s recent tweet, for example:

#Bitcoin down as @BitMEXResearch unwinds highly leveraged positions. When I interviewed @CryptoHayes he said the avg. leverage (on a scale of 0-100x) was 20. Extrapolating that number, adding recent outflow data, and you get a (temporary) inferred BTC price of $8,800 – $9,300.

 

Many analysts are saying much the same thing. In fact, there’s an assumption now that bitcoin will drop into the $8k range before recovering and starting its uptrend once again.

 

Go against the herd

The problem is that when ‘everyone’ thinks something is going to happen, there’s a good chance it won’t. Look at what happens in a bubble. When ‘everyone’ says bitcoin is going up, odds are they’ve already done their buying to take advantage of that. Result: no more buyers, and the price drops. It’s this reality that well-known trader Alessio Rastani explores in a new video.

 

Rastani suggests three possible scenarios for bitcoin:

  1. Bitcoin corrects as expected to around $8,800, then continues on its bullrun to $20k, $30k, $50k even.
  2. Bitcoin corrects to the $8k range, moves back up, then puts in a surprise second correction, much deeper than the first – perhaps dropping as low as $6k or even $4-5k. Then it goes back into bull mode.
  3. Lastly, there is a chance (even if it’s an outside chance) that there are lower lows to come, with a drop back down below $3k. It might seem insane at this point, but never discount the scenario no one is talking about.

 

Markets in general love to surprise us and bitcoin especially so. And so it is wise to consider alternatives to what ‘everyone’ thinks is going to happen, like a fall to around $8,800. When this is the case, either traders place their bids above this, and the correction isn’t as deep as expected – or never happens at all. Or the expected support level doesn’t hold and prices crash deeper. Or there is a bounce off support, only to drop below it later.

 

The take-home point here: when every trader is saying the same thing, be concerned. Consider the alternative scenarios.

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