It was exactly 6 months since we caught the near blow off top in Bitcoin. After reaching $20,000 a consolidation of 3-6 months was to be expected. So far, Bitcoin has moved exactly in line with our expectation. Consequently, Bitcoin arrived at a very important juncture, fair to say this a crossroad. Recently, Bitcoin prices are flat, so what’s next is the question top of mind.
Where do we go from here is the million dollar question in investors’ minds.
At the time of writing price has retraced ~65% since the Bitcoin top in December 2017. Does it mean investors can buy it cheap now? That may be the case with one caveat: what is cheap may become cheaper. Is the current state of things bullish (buy now) or bearish (wait for lower prices before getting in)?
Bitcoin’s daily price chart 6 months after the blow off top
The daily chart shows the bullish case: the price of Bitcoin is likely to challenge the ~7255 area sooner rather than later. What happens in that area will be telling: if it can break the downtrend line it would be a hugely bullish sign, and the breakout might result in the start of the new uptrend.
The bearish case would kick in if Bitcoin’s price falls through the $6000 mark as that’s the most important psychological price point. If this level gives away, we may see strong support in the 4422 – 4954 area.
Bitcoin’s long term price chart
Zooming out, we also considered “what if” a price breakdown takes place. Although we do not forecast this will happen, nor are we saying there is a high probability of this to happen, but there are several more support levels, ultimately the 1860 – 2980 area and the rounding consolidation zone of 1150 – 1300 area.
The key take-away here is that, even if the current price levels give away, it does not imply the grand crypto bull market is over, on the contrary in fact, there is plenty of support levels to go.
This is a mid term type consolidation which has one characteristic: it strongly frustrates both traders and investors. This is the type of situation in which the vast majority of traders and investors show no patience, sell with a loss, only to find themselves chasing prices higher after x number of months (maybe one or two years). That is how Mr. Market works, and (crypto) investors better understand this dynamic before falling victim.
We strongly encourage investors to trade wisely as Bitcoin and related cryptocurrencies are prone to react violently to news. This is a very emotional market.
There is a high possibility that the current consolidation could take an additional 6 months or so.