Bitcoin right now is in a downtrend and there are no clear signs of a reversal yet. How to approach the current market ?
Bitcoin is trading below the 200DMA which is showing signs of weakness. The last time we’ve spent such a long time below this level we where actually in a bear market. IS it different this time ? Well, yes and no. YEs in the sense of that price structure is different and therefor the 200DMA moves different as well and that means that the current price action could have a different relation with moving averages as we have seen in the past, however we have to interpret this as a bearish sign.
What to do right now ?
First of all, from my perspective in the grand scheme of things everything is still alright. Bitcoin (and other assets like SP500) are still looking strong long-term (Coming 4-6 months). However short term there might be downside risk still.
If you are 100% positioned in Bitcoin (over-exposed) I would definitely consider to take a stable coin position.
A healthy allocation would be 80-20%. 80% in Bitcoin and 20% in stable coins however this might vary based on your risk management.
If you took profits at +-60k then you might want to consider DCA back in around these levels.
Is there any further down-side risk ?
Yes, there is. As long as Bitcoin is trading below key-moving averages we have to have a bearish bias. Remember that sentiment can change very quickly we should be prepared for that.
Bitcoin is trading in a broad range from 30k-40k. To really get a more bullish bias right here Bitcoin should break above the 42k level and hold this level as support. That would set a slightly more bullish structure in the chart.
If Bitcoin where to break 30k decisively we could see a very bearish scenario of Bitcoin reaching 17-19k levels. However I definitely consider this as the worst case scenario for Bitcoin right now. To test the previous bull market (2017) all time high (+-19-20k).
In my last article I’ve talked about different scenario’s for Bitcoins recovery from this drop. Well most likely a V-shape recovery is not in play and this shows us that it will most likely take some time for Bitcoin to recover and transition back into an uptrend.
The daily support of Bitcoin is at 30-32k
Buying at the daily support is a great long term opportunity. It’s good as well to always have some stable coins in the event of a bigger market crash and if Bitcoin where to re-visit the 17-19k levels.
It’s okay to wait
In the market conditions right now it’s very unclear what any short term movements could be. Therefor it’s okay to have now and then periods where you don’t try to outsmart the current market conditions. This is the strength of a trader, to have discipline and patience at the right moment.
All the alt-coin concepts are still there and targets are still meant to be reached. With the latest Bitcoin small bounce, alts rallied further than Bitcoin which is a sign of strength. With alt-coins I would say as well, have patience. If you’re positioned it’s okay to hold through this period. I still expect to reach the published targets.
Light at the end of the tunnel
Momentum indicators are very oversold (RSI+MACD) which is showing that once trend is changing again there is a lot of space for upward momentum. Soon the hash ribbons will fire a buy signal as well which historically was a great bullish signal for Bitcoin.
The hash ribbons are an indicator showing miner capitulation and have been proven quite accurate as a long term signal. When the 1-month SMA of Hash Rate crosses over the 2-month SMA of Hash Rate, the worst of the miner capitulation is most likely over, and the recovery has begun. This is followed with a buy signal.
From the 12 buy signals that have ever been been fired, 10 of them signalled a rally in Bitcoin in the coming months with low downside before the rally occurred.