Where are we right now?
To answer this question, we have to first talk about cycles – Wyckoff Price Cycle. Across any asset class (stocks, bonds, properties, crypto, economy etc.), you will invariably identify a common pattern of market cycle. There are 4 phases of market cycle: Accumulation, Mark-up/Uptrend, Distribution, Mark-down/Downtrend. Cycles are driven by one word and that is emotion. Smart money comes in during the accumulation phase and gets out during the distribution phase. Dumb money comes in during the Distribution phase and gets out during the accumulation phase.
The last bitcoin bear market lasted for 13 months in 2014, followed by another 7 months of uncertainty, wait-and-see, fear of getting in, traumatised from capitulation etc. This is known as the accumulation phase. Prices have flattened and short sellers have dried up. Where are we right now? I might be wrong but from the charts, it seems as if we are going through the accumulation phase right now. Bull is coming? I don’t think so… I think turbulent months are ahead of us and price will definitely trend sideways bouncing off resistance and support levels for a period of time before we see CryptoSpring. The last accumulation phase took 7 months before volume spiked up, we are now only at our 2nd month.
What about the risk-reward ratio? This measures how much more you can lose in comparison to how much more you can potentially earn. The last bitcoin crash in 2014 saw prices came down to about 85%. We are currently at around 85% too. You can judge for yourself the potential upside if history repeats itself.
The truth is no one knows where the market is headed, I have no idea when cryptospring is coming OR will it even come… Will bitcoin hit 20k again? 50k? 100k? Or goes back to $0? No one knows. The best we can do is ask ourselves where are we right now? Then look at the probability and risk-reward ratio. Is the upside opportunity higher? Is there more room for selling to continue? And lastly make your decision based on that. There are only 2 risks in investing. The risk of losing money OR the risk of forgoing opportunity gains. The situation right now time and time reminds me of the quote “Buy when there is blood on the street.” Take contrarian positions and bet against the herd. Not easy to do that and be right uh?