It’s been a brutal year for crypto. If you’re a hodler, not a trader, then you’ve seen the value of your portfolio decrease by anything from 75% to 90% or even more. You’ll be wondering where the bottom is, or whether there even will be an end to the downward slide.
It may not feel like it, but these are also times of opportunity. At some point the market will bottom out. Then there will be an accumulation phase, and the new cycle will start. Last time around, those who managed to buy during the capitulation ($155) saw over 100-fold returns. That happened fast and the opportunity was soon over, but the market then saw a long period of stability at $220-240.
The trick, of course, is knowing when it’s time to buy. If you sold higher up, particularly above $10k or $15k, it’s not so critical – these prices are bargains by comparison even if they go lower. Naturally, the smarter you can be, the more ROI you’ll squeeze out of your investment.
The following two articles are excellent overviews of how market cycles work – particularly in bitcoin – and the least risky time to get back in.
The first article describes the pattern followed by almost every speculative bubble in history, and how with each bubble bitcoin makes a ‘higher low’. That is, prices at the end of each bubble are exponentially higher than after the end of the last, so that it only makes sense to view the overall progression on a log chart. It then unpacks the cycle into four stages. For our purposes, only the last two, capitulation and accumulation, are important at the moment. In fact, we’ll assume you’re not a pro-trader who manages to call the market and pick up BTC at rock-bottom prices – levels that might last for hours or minutes only. You’ll need to accumulate carefully, over a period of time, and at a time when mainstream media is silent on bitcoin or still deriding it. The guys who bought following the Bitstamp hack at the beginning of 2015 – that’s who you need to be.
The second article looks at the same thing from a more technical perspective, looking at not just where the market bottoms but how you know it really has bottomed, and that it’s safe to get back in again. You won’t pick up BTC so cheaply, but it will be lower risk (never zero risk). In this instance, we’re looking for a retest of old support after price has dropped below it, made a higher low, then a higher high. If established support holds, that’s promising. For 2015 that point was around $300. We need to watch and see how this market plays out, but it could be $6,000 this time around – we won’t know where to set our expectations until the bear market has gone on longer and new support and resistance are established.
Read these two articles carefully. They may change the way you view the bear market and the opportunities it holds.
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