n the eyes of its critics, Bitcoin can’t win. The normal knock on it is that it is way too volatile, whereas a month of relative stability, such as the one we have seen recently, is criticized as evidence that the boom is over.
The first criticism would have some merit if those getting involved in Bitcoin had no market knowledge at all, weren’t aware of the investing risks, and needed their hands held by people who have completely missed out on the big move. The second doesn’t even have that redeeming factor.
When other assets had a period of stability after volatility, the consensus view was that it was consolidating. And what was to follow would be a steadier and more controlled run up. Yet, for some reason, there are those who feel that Bitcoin’s consolidation is no such thing, even though the last time we saw something similar in the digital currency, it was followed by an epic bull run.
After Bitcoin’s first spike up to around 20,000 at the end of 2017, it dropped sharply for most of 2018, falling all the way to 3,200 by December of that year. What followed was a three-month period where BTC/USD bounced around between 3,200 and 4,100. Now, for most things, a range close to 30% would be considered wide and a bit troubling, but for Bitcoin, since it had jumped a thousand percent or so in the last couple of years, it was a notable period of stability.
You are probably aware of what followed that. Within two years of that consolidation, Bitcoin hit $50,000. The people that are currently saying Bitcoin has no value and is about to drop to zero are the same ones that said that in the past. They were wrong then, and they will be wrong now too.
The fact is that Bitcoin is indeed extremely volatile at this point in its life. For may of us, though, that is a feature, not a bug. For traders, volatility equals opportunity. As long as you understand how to limit your overall risk in any trade, you must embrace that risk. A chart such as that for Bitcoin right now gives you a perfect opportunity to do just that.
When I first started to write about crypto in these pages seven or eight years ago, there was no point in looking at charts. My consistent bullishness back then was based on the belief that as more people came to understand what Bitcoin was, more would see its inherent utility and potential. It had nothing to do with any technical pattern or signal. Now, a lot of movement in the market is caused by traders, particularly institutional traders, who pay attention to levels and patterns. That means charts now matter, and there are logical levels to use as markers, both for stop losses and profit targets.
In this case, the first relevant level is that low around 29,000, which is now a logical level to set a stop. Incidentally, the fact that it is there rather than at the round number of 30,000 is significant. Institutional traders typically attack obvious, round number levels where stop loss orders might be, looking to push through them and trigger the stops. Institutional traders, however, are fast money, and will buy back as the momentum that their actions cause kicks in. So such moves are usually only temporary, and the natural, fundamentally driven direction will resume before too long. With Bitcoin, that now looks to be upwards, and a sustained break of 40k brings the highs of a couple of months ago into view.
A week or so ago, when BTC/USD was breaking that 30k level, I wrote here that it was a critical time for Bitcoin. I believed it would survive and thrive, just as it has in the past. That case is now supported by technical analysis that shows what happened a few years back. It also allows for a logical stop loss, so it looks like a good time to go long on BTC or add to existing holdings.
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