This analysis is about how we'll know when a new all-time high is probably close, and likewise how we'll know when we may finally see some sustained alt rallies. Since my last Bitcoin chart, we dropped from $13700 all the way to $9700, which is roughly a 40% correction. I actually gave a strong probability of a violent pullback before at least an attempt to break the bullish channel on Bitfinex (orange). I've talked about the importance of these channels in all my recent Bitcoin analyses.
Let's look at what happened when Bitcoin got rejected at the top of the Bitfinex channel twice between November, 2015 and June, 2016:
You'll also see that the channel was formed by the last bear market's final capitulation bottom and the subsequent rejection after the reversal. With the scenario on the left (the November 2015 top), Bitcoin took nearly 7 months to make it towards a new high. However, once it experienced the initial violent pullback, the low was set, and it simply moved sideways/slowly up. It didn't even test the bottom of the channel until much later. If a situation like this occurred today it would be a good time for some alts to catch up (if they are going to do so). Before the sideways movement, I think Bitcoin might need to test the top of the channel as resistance again. This means we could see above $14K for a brief period. Then I'd like to see volume really die down for consolidation as money flows into alts (this would be my ideal scenario, but it does not have to play out).
Volume is still fairly high (and consistent) at the moment, which indicates that there are a lot of big trades occurring. To me, this hints more at distribution (profit taking), since it is more likely that big sells are coming from people who bought much lower earlier this year. In all my observation of this market, volume tends to reach a peak near tops or bottoms. This is just my opinion though. This means that we could also be at a moment that's more similar to the June 2016 top. This would make sense, given our proximity to the ATH. The volume profile matches up a bit better as well. Volume in 2016 didn't drop off until Bitcoin stagnated. It ultimately dropped back down to the low from the initial rejection at $789.80, which was $555.60. From there, with support from the channel, Bitcoin slowly consolidated and moved up on low volume. It then finally broke the high six months later in December 2016. We didn't get our next violent pullback until Bitcoin hit close to its previous ATH (between $1100 and $1200). That rejection took us all the way back down to test the mid-$700 resistance area as support. Despite that drop, Bitcoin bounced perfectly at the bottom of the bullish channel. The channel bottom was tested one more time after that before finally making a new all-time-high and heading towards the eventual $19K peak. If a similar scenario played out today, we'd stagnate around current levels, drop back down towards $9700, and slowly grind up towards our ATH over the next several months before dropping to test $13K as support.
There are still many possibilities, and of course this is just speculation using the information available. One of the other scenarios is that Bitcoin breaks above the channel sooner rather than later. That's actually why I've included the Bitstamp chart here as well. On Bitstamp, we' broke out above a similar channel (light blue) and are currently trying to break out and hold above it again. If Bitcoin holds above, and consequentially breaks out of the Bitfinex channel sooner than what past performance may indicate, this would, in theory, annihilate most altcoins even further on their ratios.
Speaking Of Altcoins
In regards to altcoins, I'm following a similar channel, but alts are growing at a much slower rate than Bitcoin. If and when this changes, we will know. It could happen at any time. Here is the altcoin market cap illustrating what I'm talking about:
What's interesting is that alts moved sideways (kind of like what they're doing now) until Bitcoin's volume died down and it started consolidating after the June 2016 peak. Alts started going up in mid-July 2016. They didn't really start to break out until April 2017 after yet another major Bitcoin pullback. This means we could be inching closer and closer to the start of an altcoin bull run, particularly if the June 2016 comparison plays out. Altcoin/BTC volume is fairly low at the moment, but it did briefly increase drastically right around the most recent Bitcoin top near $14K. To me, this is the first signal of money flowing back into altcoins from Bitcoin.
Additionally, I don't think the crypto market could withstand much above a 70% Bitcoin dominance. In that case, something very different would happen. The crypto market would change (for better or for worse). Bitcoin would become purely a store of value, and the only cryptos people would use for everyday payments would essentially be digital money backed by national currencies (looking at you, Libra). I've seen this fear voiced in numerous forums. This scenario would defeat one of the main purposes of cryptocurrencies - monetary systems that remain outside the central control of centralized governments and institutions. It was meant to be a financial system upheld by everyday people and decentralized to eliminate the power held by bad actors. This is one of the many things I like about crypto. I actually didn't get into crypto to profit financially at first. I did it because I believe in it. Unfortunately, human greed will have turned this market into something that it was supposed to fight against - and yet again, "altruistic" intentions by those in power will have self-destructive results. My hope is that even if we become a "cashless society" with only digital fiat, there will be room for cryptocurrencies to be "digital cash." Sorry for the rambling.
Some takeaways from this analysis:
1) Bitcoin will probably head towards the next bubble peak if the channel is broken to the upside, but this could take many months to play out. I made a post saying Bitcoin could make a new ATH by this summer not so long ago, but that's only IF the channel is broken sooner rather than later. I'd much prefer the slower scenario.
2) Based on previous rejections at the top of the channel, the low is possibly set, and we may never see below $9.6K prices again. In some of my recent Bitcoin posts, I suggested that we may never see sub-$7K prices again. That's looking way more likely now, though sub $9K remains to be seen.
3) Altcoins are still slowly moving up/sideways, mirroring the long period of horizontal movement before the sudden explosion in July 2016. It's important to note that this explosion didn't occur until after Bitcoin reached a medium term peak and volume started to die down.
4) Nobody knows where Bitcoin is headed in the short term. Anyone who says "this WILL happen" should never be trusted. There are many things that can play out. I'm just trying to make sense of this market and present possibilities. One thing is clear –– Bitcoin is in a bullish trend, and timing the pullbacks is difficult but not impossible. The market quickly establishes new supports along the way, so traders lose out in the long term more often than not.
This has been one of my first extended written posts in a while, but I did want to make this for future reference. I'm glad I wrote many of my posts from earlier this year (rather than recording videos) because I can easily link back to certain sections. If you took the time to read this analysis, thank you : ) This is not financial advice though, as always. Just for personal use and speculative purposes.
-Victor Cobra
Let's look at what happened when Bitcoin got rejected at the top of the Bitfinex channel twice between November, 2015 and June, 2016:
You'll also see that the channel was formed by the last bear market's final capitulation bottom and the subsequent rejection after the reversal. With the scenario on the left (the November 2015 top), Bitcoin took nearly 7 months to make it towards a new high. However, once it experienced the initial violent pullback, the low was set, and it simply moved sideways/slowly up. It didn't even test the bottom of the channel until much later. If a situation like this occurred today it would be a good time for some alts to catch up (if they are going to do so). Before the sideways movement, I think Bitcoin might need to test the top of the channel as resistance again. This means we could see above $14K for a brief period. Then I'd like to see volume really die down for consolidation as money flows into alts (this would be my ideal scenario, but it does not have to play out).
Volume is still fairly high (and consistent) at the moment, which indicates that there are a lot of big trades occurring. To me, this hints more at distribution (profit taking), since it is more likely that big sells are coming from people who bought much lower earlier this year. In all my observation of this market, volume tends to reach a peak near tops or bottoms. This is just my opinion though. This means that we could also be at a moment that's more similar to the June 2016 top. This would make sense, given our proximity to the ATH. The volume profile matches up a bit better as well. Volume in 2016 didn't drop off until Bitcoin stagnated. It ultimately dropped back down to the low from the initial rejection at $789.80, which was $555.60. From there, with support from the channel, Bitcoin slowly consolidated and moved up on low volume. It then finally broke the high six months later in December 2016. We didn't get our next violent pullback until Bitcoin hit close to its previous ATH (between $1100 and $1200). That rejection took us all the way back down to test the mid-$700 resistance area as support. Despite that drop, Bitcoin bounced perfectly at the bottom of the bullish channel. The channel bottom was tested one more time after that before finally making a new all-time-high and heading towards the eventual $19K peak. If a similar scenario played out today, we'd stagnate around current levels, drop back down towards $9700, and slowly grind up towards our ATH over the next several months before dropping to test $13K as support.
There are still many possibilities, and of course this is just speculation using the information available. One of the other scenarios is that Bitcoin breaks above the channel sooner rather than later. That's actually why I've included the Bitstamp chart here as well. On Bitstamp, we' broke out above a similar channel (light blue) and are currently trying to break out and hold above it again. If Bitcoin holds above, and consequentially breaks out of the Bitfinex channel sooner than what past performance may indicate, this would, in theory, annihilate most altcoins even further on their ratios.
Speaking Of Altcoins
In regards to altcoins, I'm following a similar channel, but alts are growing at a much slower rate than Bitcoin. If and when this changes, we will know. It could happen at any time. Here is the altcoin market cap illustrating what I'm talking about:
Additionally, I don't think the crypto market could withstand much above a 70% Bitcoin dominance. In that case, something very different would happen. The crypto market would change (for better or for worse). Bitcoin would become purely a store of value, and the only cryptos people would use for everyday payments would essentially be digital money backed by national currencies (looking at you, Libra). I've seen this fear voiced in numerous forums. This scenario would defeat one of the main purposes of cryptocurrencies - monetary systems that remain outside the central control of centralized governments and institutions. It was meant to be a financial system upheld by everyday people and decentralized to eliminate the power held by bad actors. This is one of the many things I like about crypto. I actually didn't get into crypto to profit financially at first. I did it because I believe in it. Unfortunately, human greed will have turned this market into something that it was supposed to fight against - and yet again, "altruistic" intentions by those in power will have self-destructive results. My hope is that even if we become a "cashless society" with only digital fiat, there will be room for cryptocurrencies to be "digital cash." Sorry for the rambling.
Some takeaways from this analysis:
1) Bitcoin will probably head towards the next bubble peak if the channel is broken to the upside, but this could take many months to play out. I made a post saying Bitcoin could make a new ATH by this summer not so long ago, but that's only IF the channel is broken sooner rather than later. I'd much prefer the slower scenario.
2) Based on previous rejections at the top of the channel, the low is possibly set, and we may never see below $9.6K prices again. In some of my recent Bitcoin posts, I suggested that we may never see sub-$7K prices again. That's looking way more likely now, though sub $9K remains to be seen.
3) Altcoins are still slowly moving up/sideways, mirroring the long period of horizontal movement before the sudden explosion in July 2016. It's important to note that this explosion didn't occur until after Bitcoin reached a medium term peak and volume started to die down.
4) Nobody knows where Bitcoin is headed in the short term. Anyone who says "this WILL happen" should never be trusted. There are many things that can play out. I'm just trying to make sense of this market and present possibilities. One thing is clear –– Bitcoin is in a bullish trend, and timing the pullbacks is difficult but not impossible. The market quickly establishes new supports along the way, so traders lose out in the long term more often than not.
This has been one of my first extended written posts in a while, but I did want to make this for future reference. I'm glad I wrote many of my posts from earlier this year (rather than recording videos) because I can easily link back to certain sections. If you took the time to read this analysis, thank you : ) This is not financial advice though, as always. Just for personal use and speculative purposes.
-Victor Cobra
评论:
Just posted a comprehensive altcoin market analysis, using the historical relationship between Bitcoin and alts to gauge when we'd see an alt season:
