Postmortem of a bull-run :(

LeoFinance
6 days ago
6 Min Read
1270 Words


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I've awoken to see there was no violent bounce, although 100k Bitcoin volume per day is absolutely legendary. Taking a step back after seeing the full 30% retracement complete within 36 hours was quite sobering for me. I was ignoring many warning flags that I had set up for myself in previously.

As soon as Bitcoin broke $20k I wrote about this:

Two Weeks To Peak

Exactly 25 days ago right when we broke $20k I wrote the following:

Sometimes it takes around 3 weeks.

Looking at the 2019 run again:

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We see it took pretty much three weeks, with the first week being less defined but the two before peak being well defined. I'm sorry to report that this 30% retracement likely means the top is in.

We can also see from this 2019 chart that the first retracement was pretty much also 30% within 5 or 6 candlesticks, pretty much exactly the same thing we are seeing here. Hopefully we have enough momentum to make it back up to $40k unit bias, but according to 2019 we might not get that kind of momentum for a week or more.

POSTMORDEM:

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I pretty much got exactly what I was looking for.
  • After we broke $20k, the price rocketed up for 3 weeks.
  • At the beginning of the third week volatility became unstable.
  • x3.2 above the doubling curve at peak.
  • Violent 30% retracement within 36 hours.

Essentially with how unstable the market has become and considering these circumstances, if we don't absolutely rocket to all time highs within the next 36 hours I'm calling this run over and it will take up to 3 months to deflate fully. Again, wait for a crash in early April or late March to buy back in.

Rule of three

Another reason why I'm annoyed at myself is that I blatantly ignored my own rule of three. Often times you only get three pumps up, but sometimes you get that magical forth pump. Looking at the above analysis, we see that the spike to $42k was the magical 4th pump, and I was ignoring it in real time because I just assumed corporate sharks would push us up indefinitely.

Corporate Sharks

Michael Saylor was able to accumulate massive amounts of Bitcoin even when the price was still $10k-$13k. When it hit $20k he added on even more. Now that the price has hit $42k, we might have to assume that the sharks have gotten their fill and they are about to chill out with their buying; not willing to push further all time highs. Looking at the current volume it's hard to imagine someone wanting to buy more Bitcoin than they've already acquired with the price as bubbled as it is.

Coinmarketcap.com, Coingecko.com, and the other price index sites are reporting 24 hour volume of higher than $100B, more than 10% of the entire Bitcoin market cap. Obviously a lot of that is fake wash-trading but it doesn't matter. Volume is at all time highs no matter how one slices it.


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How to trade this market?

Basically anything above $35k is a good price. The safest bet is to simply very slowly cost average sell when the price is $35k or above. For example: I think it would be very safe to sell 1% of what you're gambling with every day that the price is above $35k. This is very conservative, as it is quite likely that the price won't be above $35k for very many days total over the next few months. At the same time this strategy allows one to hold quite a bit just in case we can still rocket to $50k.


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$50k

Considering we are heading into mid January, the month we always expect to have massive volatility and uncertainty in both directions, this is all working pretty much according to plan. We peaked on Jan 8th, and even in the 2017 bull run we had a nice dead-cat-bounce after peak to almost-ATH on Jan 5th and 6th. Truly we are in the precise pocket we would expect to be in at the moment.

$20k

Contrary to what all the bullish analysts are saying, it should be totally obvious now that $20k is not off the table as many are saying. In my opinion, it is almost 100% likely that we return to this level eventually. If it hasn't happened by summer $25k is probably the lowest we can be at during September: the second best time to buy.

18-month bull runs?

Now that the 2017 bull run is 18 months away from the 2019 bull run, and the 2019 bull run is 18 months away from the 2020 bull run, I have to ask myself: is Q4 2021 going to be a psychout 'fake' rally?

The real bull run may very well be Q2 2022 if this pattern continues playing out. We'll have to see how high we are above the doubling curve at the end of the year. If Bitcoin is trading above $250k then that should be the top, while if we are trading around $100k then we might only retrace 30% in Q1 2022 and springboard to massive all time highs in Q2 2022.

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People are saying this dump was sparked by USD spiking up on value on FOREX. Is there any truth to that, or are desperate people simply once again just looking for any reason for why Bitcoin bleeds? From a 0.81 to 0.82 gain in a few days? Who cares? This is a 30% retracement right in the pocket we would expect. Bitcoin does what it does pretty predictably and I don't think stuff like this has much merit. But what do I know (not much).

Very good/bad at predicting stuff.

You'll notice that I'm really good at predicting when volatility is coming, but very bad at guessing which direction it's going. Still working on the latter end, but I feel like this bounce off of $30k is super legit and obvious. Seeing 100k BTC/USD volume on Coinbase... one exchange one pairing... is pretty insane at these levels. We have a ton of momentum here, but the chance that this momentum is just a dead-cat bounce is very high.


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Again, barring any Black Swan events like a "terrorist" attack on Jan 20th, we likely have quite a long time to ride this out without having to worry about it. Simply holding until volume drops to 10k on Coinbase and the price loses all volatility will be an obvious moment to bet on the market dipping hard. But there will be many many mini pump/dumps along the way while the market reels from this liquidity injection.

Fin

I greatly need to expand on these ideas of the economy being in extreme danger as this controlled demolition of an economy moves forward. I was going to do it here but it's so off topic that I'll have to start a new post.

I think we have more than enough evidence to assume that the top may be in and perhaps we should be hedging against that bearish outcome. The best advice I can give is to not move in and out of the market more than 5% at a time during this unpredictable volatility. There's no reason to make big moves right now. Dollar cost averaging is still the way to go, and that will remain true indefinitely.

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