Cryptocurrency Investment
The Bitcoin Saga

Bitcoin price follow up continued — How will the shakeout end?

Burgess COMMENTARY

Peter Burgess

DK Entrepreneur, Fund Manager, Ex-Consultant and Hobby Ice Hockey Player. Child of the Sun. Any opinions personal, never investment advice, sometimes parody Jun 25 Bitcoin price follow up continued — How will the shakeout end? Briefly before I start: the below is my personal opinion and not my professional advice. I am describing my views, not giving advice. Prices of any asset can rise or fall. This is a follow up post from a series of price opinion pieces. The latest one can be found in this link below and it makes sense to briefly re-read it to be on the same page: Bitcoin price follow up & some “bold” predictions I need to start this by clearly stating that this is my personal opinion. It is neither my professional opinion nor is… blog.goodaudience.com With the price of bitcoin falling as low as $5,750 this weekend seemed to be a good time to refresh my outlook. To recap, in November my scenario (linked in the above article) said that we would possibly rise by more than 100% in short order to complete what I call the “bubble roof” and then likely would come back down hard to “as low as $5,500”. The wave count I presented stayed true till about May 2018, when (as explained in the post linked above) it seemed that the last wave down would be an extended wave that took a bit longer, but the target derived was still $5,000 (but possibly as low as $2,000). As the price has now approached those targets it is time to update my outlook. Chart outlook The only reason I look at charts is that I believe people as a whole behave similarly in similar situations over time and therefore a look at the past can help to find a likely outcome for the present. Medium Term Chart If you refer to my other price-related articles you will see that the Elliot Wave count (no matter whether you think this is correct from a technical analysis precision stand point; I am aware and have said before that my wave count is basic as all I try to capture is human emotions, not a “perfect” technical analysis and hey — it works for me) was only altered once since November 2017, namely by moving the small and capital “C” end point a bit further out in time. Otherwise it still remains valid and I still believe that we will be hitting the area around $5,000 at some point sooner rather than later. Even if we don’t go as low anymore, with my last article predicting this dump at a time when bitcoin traded at $9,300 you can imagine that I am reasonably happy with how the moves played out, whether they hit my final target or not. The more interesting question to me is whether hitting this target means that bitcoin has bottomed and that it is likely to start a new bullish market cycle at that point (1–2–3–4–5 waves up; followed by a new A-B-C correction). You can see below that this would be quite significant in that the last 5 wave (green, bold numbers on the chart below) took us from c. $200 to c. $20,000. Long Term Chart So what can we do to determine which is more likely to happen? On the technical side, we can examine how the “big brother” of our bitcoin bubble, namely the .com bubble, played out (nota bene: if you still do not believe that we were or are in a bubble, then you don’t need to read on). I posted the below two charts on Twitter a few weeks ago and there are a few interesting takeaways in my opinion. .com vs crypto bubbles As you can see, the Nasdaq had four significant bear market rallies during the .com bubble bursting. If you look at their magnitude, as well as their timing, you cannot help but notice how similar (on a much faster time scale, but still very similar in terms of proportionality on the chart) the bitcoin bubble has burst to date. Both bubbles had a strong rally of approximately 35% almost directly after their all time high, which failed to reach a new high. That was followed by a strong rally after the initial sell off and then another one a few time intervals later. The Nasdaq had one more strong bear market rally of close to 60% from a capitulation low before it built out its final leg down, which also ended in capitulation, but importantly was characterized by a much slower grind downwards than the moves prior. Now, let’s look at how the last bitcoin crash from 2014 unfolded. I have tried to show what I mean by combining the bitcoin chart of 2017/18 with the one of 2013/14 on the same screen: The “good” news here is that (eerily analogous to the Nasdaq chart) after another small and sharp move down ($5,000-$5,500?) that should still come here, we would be in line for a very strong 50%+ rally. The bad news of course is that (also analogous to the Nasdaq chart) after all your usual suspects on crypto twitter will have convinced you that this was the “Wyckoff spring” and that we are now on the road to new all time highs, causing a lot of people to FOMO buy into that rally, we would see the final shakeout, which would likely end somewhere in the $2,000s. I personally think that the two analogies drawn here are too strong to ignore if you buy into the notion that bitcoin is currently driven almost exclusively by either manipulated tether trading or human emotion. There is a way to fit this move into Elliot Waves as well (meaning we would not have been in an A-B-C correction but in a 1–5 move down instead of up), but I would revisit that when we actually get there. Concluding, in my opinion it is still likely that the current move ends in a sharp move towards $5,500 or slightly lower. After that, everything is in place for a relief rally (likely driven by short covering, not new investment), but the final shakeout will still happen. A bubble like the current one is unlikely to end with initial buyers (for my purposes people who bought around $1,000–2000) still being as relaxed as they currently are. These are the guys that will need to break a sweat in my opinion for us to have found a sustainable bottom. In any case, I personally would not trust any rally that does not clear $12,000 significantly. Fundamental considerations It is important to note that the entire technical commentary above is based on a certain view of the fundamental state of crypto. The main pillars of this view are: 99% of all ICOs are worthless and will lose investors money UNLESS they add security-like rights (see here) Crypto is sadly full of scammers that have an easy time taking advantage of inexperienced retail investors (see here) Regulations are not enforced and still very unclear, so large institutional investors, even if they truly wanted to (which they currently don’t for the same reasons retail ones don’t — no FOMO), cannot enter Crypto is currently a closed community. Those that are part of the “cult” have c. 80–90% of their investable funds already invested and cannot buy much more. In order to truly break free from the current bear market new money that is currently not interested in crypto has to move into crypto Chinese regulators uphold their ban on bitcoin investing. If they lift this ban, there is a chance this is enough new money to break free (but it more likely just fuels the last bear market rally as described above). Tether is unlawful, unauditable and a major manipulative force that will likely still implode. For example by the US government seizing the funds on their accounts (noting the law firm letter is not an audit in passing) under money laundering regulations. Also, you may want to have a brief look at these considerations: The biggest myths in cryptocurrency investing today and what would cause a new all time high Following the cryptoshpere on twitter and elsewhere I notice that quite a few myths hold steady in different parts of… blog.goodaudience.com If any of the above environmental factors change, the technical situation would become irrelevant and we could see a large move up or down at any time. Thank you for reading. If you enjoyed this, please clap and have a look if you’d like to follow me on twitter. Lastly, the all important disclaimer: this is my personal opinion, not my professional advice. Most of all this is not investment advice in any way. Crypto assets can fluctuate widely in value and all of your capital can be lost. I have a 50/50 chance of being right. Any negative views expressed are solely aimed at the token in question, never at the development teams behind them for which I have utmost respect (if they are sincere). BitcoinCryptocurrencyEthereumBlockchainCrypto