State of the (Crypto) Market - 2019.3.25

These Calm Seas Signal a Storm

Second lowest levels of price volatility in 24 months

The last seven days in the Bitcoin market have been exceptionally boring. On Coinbase, the lowest price was $3,937 and the weekly high was only $4,056. In other markets, a similar 3% price range would be really exciting. Not here. A 3% price range is about as boring as it gets. So that begs the old question - is no news good news? That hasn’t been the case in crypto for 18 months. As the bear market grew in strength, every time we saw this type of price inaction it had portended a huge drop in price. Should we expect history to repeat itself, or are we due for a bounce?

As always, my default answer is “I don’t know”. I tell ya what, let’s make a plan for either option.

Breaking Up

Let’s assume the next few days see a positive break in Bitcoin. If that happens, refer back to my March 18th post, and in particular Bitcoin’s huge price resistance at $4,200. Bitcoin hasn’t closed above that number since November. I’m not prepared to call any type of breakout until that is breached. If it does, it’ll be tough to predict price movements. My first instinct will be to bust out the old Fibonacci charts and figure out the retracement fib lines for the drop from $6,000. If and when that happens, I’ll let you know. Basically, if Bitcoin closes on the daily over 4,200, I’m buying.

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Breaking Down

So what happens if Bitcoin drops below the solid purple line? One possible answer is that it plummets straight down to our local bottom at $3,140. Like an elevator straight down. Seriously, that’s entirely possible and keep that in mind. Another option is that Bitcoin is stopped at the dashed yellow lines along the way. Those are possible lines of support. As Bitcoin has gone up this calendar year, it has made small price retracements, each time hitting a support line higher than last. That’s a really positive sign for price development. Will these lines hold on the next drop? I’m going to be watching each support line to see if there’s a daily close at or above any particular line.

If the price does stabilize on one of these lines, the next step will be to decide if we’re still on a track for positive price growth. That still might be possible, but just on a less aggressive purple line. I drew another dashed purple line to show a hypothetical scenario for what that might look like.

As you can see, Bitcoin’s price is right at that purple support line. I’m not going to be worried if the price punches through that line. The angle for that line is pretty high, and really isn’t sustainable over the long term.

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Be Prepared

After being in this market for a while, there’s one thing I want to point out to those who haven’t. When massive price movements happen, they occur so so so so quickly. For example, in November the price dropped by over $1,000 in a single day. . . . twice. It’s almost impossible to get ahead of spikes and drops like that. It’s best to just observe and wait for things to settle, rather than try to trade those swings while they happen.

How do I prepare for these events? Right now, I’m completely out of all positions. For me, the name of the game is balancing risk. This market situation is too unpredictable. Making a play now is too akin to gambling. The other way to be prepared is to have cash on deposit and ready to deploy. Most exchanges will accept ACH transfers without fees, but they require four or five business days to clear (FYI, Bitcoin transfers clear in about 20 minutes, any time of day, any day of the week). Thus, I’ll be ready for whatever happens.

What Did Happen this Week?

While Bitcoin, and most other coins have been laying in wait, one coin did make a substantial move this week. There’s a new entrant to the Top 10 list on CoinMarketCap. That newcomer (actually, a repeat customer) is Ada, the native currency of the Cardano network. Ada moved from $.05 to $.06 this week. That doesn’t sound that impressive to move up one penny in a week, but that is a 20% jump. The reason for the bump (probably) is the network’s 1.5 update that was successfully launched last week.

I’m not a shill for Cardano. I don’t hold any, I’ve never held any, and I’m not impressed with their current product. However, I am really intrigued by their long term road map. Who knows what will happen, but if they can actually produce what they’re attempting it could be incredible. We shall see. In any event, cryptocurrencies usually have a sell off after these types of pumps after network improvements.

Stay Frosty

So that’s the update for the week. Be careful with your positions this week. Something big should be on the way.