Finding the bottom: when is it safe to buy again?
The crash in May forced traders to make some tough decisions. Since then, most of us have found ways to reduce our crypto exposure and secure some capital. Now the question is: when is it safe to buy again? There's no way to know for sure whether we're going up or down from here, but I do know for sure where I'll be buying in either case.
--The "down" Scenario--
If price falls down into the 20s, I'm operating under the assumption that it won't go lower than last cycle's high of $19666. Bitcoin has never retested a prior cycle's ATH after topping out on the next cycle, BUT we also have to consider the possibility that this still may be a mid-bull market correction, so nothing is off the table.
It's impossible to know for certain where price will bottom out, so I'll be scaling in, i.e. taking a phased approach to buying with some portion of my total capital. There's no formula that can tell you exactly how much to buy at each price level, but I look at it as a judgement call as to the likelihood of that level being the bottom (e.g. if I think there's a 50% chance that it's the bottom, I'm buying with 50% of my capital). That call needs to be made on-the-fly based on technicals and market sentiment.
Here are the levels where I'm looking to buy.
(1) 24.5k - some believe that all the CME contract gaps get filled, and there is one such gap around 24.2k. Personally, I think it's idiotic superstition, but the fact is that the market just does what traders and investors think it will do.
(2) 20.9k - as I mentioned before, I don't think price will go below the prior ATH of 19.6k. I'm not willing to go as far as to assume that price will go all the way down to retest that level though. The shoulder line of the major head & shoulders top is around 41.8k (which I think is the next place bears will look to protect their liquidation levels) so I expect 2x selling pressure to drop off significantly at 20.9k, which makes that safest bet to not miss the train.
--The "up" Scenario--
I continue to reiterate that I believe price will need to retest the down trend line at some point. This will be the real moment of truth in determining if this is a mid-bull market correction or a full blown bear market. It's possible that price breaks above that trendline, in which case I will be buying a successful retest there.
For those who are still looking to reduce crypto exposure, that will also be an excellent place to sell (before it has a chance to test), because there is a good chance price will get rejected straight back down.
Long term investment/trading decisions are almost always the most important ones, so, as always, keep the big picture in mind.
I think we're still a ways away from a decoupling of altcoins from bitcoin (in terms of general price trend), so I'll be looking to buy alts at these levels as well.
Also note that this is just my general approach to long term investing, and I will still be doing some short term trading in the interim.
--The "down" Scenario--
If price falls down into the 20s, I'm operating under the assumption that it won't go lower than last cycle's high of $19666. Bitcoin has never retested a prior cycle's ATH after topping out on the next cycle, BUT we also have to consider the possibility that this still may be a mid-bull market correction, so nothing is off the table.
It's impossible to know for certain where price will bottom out, so I'll be scaling in, i.e. taking a phased approach to buying with some portion of my total capital. There's no formula that can tell you exactly how much to buy at each price level, but I look at it as a judgement call as to the likelihood of that level being the bottom (e.g. if I think there's a 50% chance that it's the bottom, I'm buying with 50% of my capital). That call needs to be made on-the-fly based on technicals and market sentiment.
Here are the levels where I'm looking to buy.
(1) 24.5k - some believe that all the CME contract gaps get filled, and there is one such gap around 24.2k. Personally, I think it's idiotic superstition, but the fact is that the market just does what traders and investors think it will do.
(2) 20.9k - as I mentioned before, I don't think price will go below the prior ATH of 19.6k. I'm not willing to go as far as to assume that price will go all the way down to retest that level though. The shoulder line of the major head & shoulders top is around 41.8k (which I think is the next place bears will look to protect their liquidation levels) so I expect 2x selling pressure to drop off significantly at 20.9k, which makes that safest bet to not miss the train.
--The "up" Scenario--
I continue to reiterate that I believe price will need to retest the down trend line at some point. This will be the real moment of truth in determining if this is a mid-bull market correction or a full blown bear market. It's possible that price breaks above that trendline, in which case I will be buying a successful retest there.
For those who are still looking to reduce crypto exposure, that will also be an excellent place to sell (before it has a chance to test), because there is a good chance price will get rejected straight back down.
Long term investment/trading decisions are almost always the most important ones, so, as always, keep the big picture in mind.
I think we're still a ways away from a decoupling of altcoins from bitcoin (in terms of general price trend), so I'll be looking to buy alts at these levels as well.
Also note that this is just my general approach to long term investing, and I will still be doing some short term trading in the interim.
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