A realistic outlook on Bitcoin
Updated
Bitcoin - the name alone suggests that we are dealing with a physical asset, a "golden coin" if you so desire that constantly grows in "storing value".
Accompanied by the image of a golden coin this narrative was able to manifest into most traders heads as a "to the moon" of "|almost| secured free wealth creation"
But we are not .
Bitcoin is a virtual chain of blocks - Fair enough, but what exactly does that mean?
Bitcoin is nothing but an accumulation of code lines remotely stored in a giant hard ware complex somewhere in China.
Think about it's mechanism like a physical chain of locks. They are all bound together and need a key to be opened, or a new
lock with a new key to be expanded.
"OO+OO+OO+O+O" where O is one lock.
Now, If I transfer money from Wallet A to Wallet B the following codeline happens:
If Sum [BTCwallet[t1]] != Sum [BTCwallet[t0]]:
func coinTransferToAnotherWallet.
Therefore my wallet knows that I want to conduct a transaction and sends this information to a storing hardware centre.
A so called "Hash" key is produced and added to the coin's block. That know leaves my wallet with two "keys" on. One is mine
and one is my recipient's. Obviously this is all in the block.
Now a true race begins, a race for the reward of 6,5 BTC the fastest calculator receives for conducting this transaction by connecting
this new hash to the already existing block of chains.
For simplicity reasons we are goíng to assume that my computer works fastest. Hence I receive 6,5 BTC to my account, but I only transferred 0,015.
Doesn't matter, the reward is the same, I have to split the coin's block however which makes this "conduction process" we call "mining" take longer and longer
with every little transaction that is undertaken. Some coins are split 1 million times which adds endless lines of codes and sublines of it to it's block.
After about ten minutes like I mentioned I was the fastest, receive 6,5 BTC as a reward and the recipient opens his key via the now secured hash code, sends a signal
back to me stating that he or she |hey women trade as well, right?| has securely received the inquiry to receive 0,015 BTC into their wallet, my wallet automatically
confirms this and allows the amount be transferred and the second key lifted as soon as my signal reaches their wallet again. This is all in the cryptogram and barely takes a
second.
Long story short
My Wallet A
[any Amount with two keys]---II
Transfer to Wallet B
"mining" to add the hash values to the existing chain of blocks [ca. 10 minutes]
Wallet B receives signal and removes one lock
[any Amount with one key left]--I
sends signal via the hash back to my Wallet A
My wallet authorizes the transaction and Wallet B to remove second key upon receipt
sends signal via the hash back to Wallet B
Wallet B removes second lock
[any Amount free to use in Wallet B]--
Now we already see two large problems that arise:
A.) The crypto's blocks of code get super messy and it takes longer than PayPal to do a transaction {Paypal by the way works pretty much the same but without the reward} and continues to take longer and longer with every transaction that is
undertaken.
B.) The rewards system allows for all kind of fraud I will not go into detail here. All I will say is to look at the example above. If I mine and transfer at the same time I can make more money than I actually transferred.
Now we can all conclude that while BTC has tremendous problems, it still works faster than a "classical" bank transfer, but lacks all sorts of regulation. That being sad, I promised a realistic chart analysis and here it is:
***************************************************************************************************************************************************************************************************************************************
Ever since 2015 BTC has risen from 110.08 |Jan 14th 2015| to 65051,07 |Apr 14th 2021| --> that is almost 65.000% it's initial value in just six years!!
It has done so by means of self expansion as explained enough and made a |small| bunch of people filthy rich. Think of that classmate that dropped high school because they put their life savings into this construct early on.
The growth of BTC can be expressed through innovation and conducted research in this field and follows a standard normal distribution as depicted here:
iedunote.com/5-adopters-innovators-adopters-majority-laggards
In all these years BTC showed constant growth and never suffered any existential threats - if you bought below 3.000 USD.
From September 14th to December 17th 2017 Bitcoin showed sudden strong climactic growth driven by a well connected community that basically decided on their own that the future of money was bitcoin, completely ignoring international jurisdiction
and well established monetary institutions. What followed was a pullback never seen in any other asset:
By February 6th BTC had lost over two thirds of it's value and had been reduced to barely 16% the value of the prior all time high by the end of the year.
Many people who had been invested into the asset sold at a loss and turned their back on the once praised "store of value". Beyond the lagging radar of media attention Bitcoin however slowly made it's way back up, trading "fairly stable" in a range of
8.000 dollars until in October 21. 2020, when Bitcoin once again started to suddenly grow climactically, peaking a little more than six months later and is on a desperately needed pullback ever since.
I believe that the pullback we experienced in 2017 serves as a blueprint to what we are seeing now - on a higher monetary level if you so desire.
But what about the future, what does it hold for Bitcoin in terms chart patterns and technical trend analysis?
If you take a closer look at the chart above you will see that Bitcoin is currently trading between the 0,618 and 0,382 Fibonacci levels measured from it's lowest point on March 13th 2020.
Ever since it's all time high it has formed a sharp reversal that transformed into a decisive downtrend only halted by means of strong bullish action shortly before reaching the 0,618 Fibonacci line,|note how bearish volume still prevails| trying to
consolidate itself by means of a double bottom in the 0,5 Fibonacci area - which you should know is not part of the famous sequence. It merely indicates that it's half way from the top or bottom.
Currently we are witnessing a minor uptrend on the one hour chart that has brought us from about 33.000 USD to a bit more than 39.000 USD in the past six days.
If you consider the double bottom only, you will see a bad head and shoulders reverse |take a look at the head, it looks like someone has worked it with a baseball bat|, but if you consider the bigger picture and the long wick that reaches all the way to
just the tick above 30.000 USD you will find a bearish triangle that has room up to about 41.000 USD.
In addition MACD and Stochastics show no signs of |bullish| diversion. Note how MACD is a lot slower to capture the momentum than Stochastics |because of longer periods| and indicating only a flat and slow momentum growth, while Stochastics
has made three crossings already surpassing the 50% mark. To me this is an indicator that the bullish phase will be a short one and that the infamous v-neck pattern we have been seeing ever since the Corona pandemic no longer has sufficient momentum
to cause unsustainable growth that is almost always followed by a climactic decline. It's just how it was designed: Fast |unsustainable| growth is followed by a rapid decline that shakes out most small traders.
My recommendation?
If you are stuck in a long position I would recommend hedging it if you feel like you must hold on to it.
Most traders do not short bitcoin and I respect that. Sometimes however we have to overthink our principles. If we want Bitcoin to behave like a real currency, we will have to accept the fact that it cannot grow climactically due to the instability of prices this growth
causes. Think about it this way: One reason Elon Musk cancelled the payment of Tesla Motors' cars with bitcoin was due to the fact that the prices for the vehicles would've had to constantly be adapted to the price level of Bitcoin.
In April I could've bought a Model S for about 1,35 BTC, whereas now I would have to pay almost two. Sometimes this amount varied intraday for as much as 14.000 dollars. Who is gonna keep up with that?
And what will happen to the real economy if somebody starts cashin' in their BTCs for hard assets. Also remember my transaction example? What if I pay good Elon 1,35 BTC for my brand new Model S while at the same time engaging in mining?
Correctly, I get a free car and reward worth four more on top of that while electricity costs barely one. Thus I will get wealthier and wealthier for spending money and engaging in consumerist behaviour that harms the environment.
That's a bad example hence it was halted.
If you feel like you must trade Bitcoin, get used to the new reality and adapt your strategies to the fact that long boom phases are most likely over. Also consider action in both ways.
For others this might be the perfect time to find new sustainable assets to trade or even take a break to focus on your life away from the screen. It's summer, go enjoy life after work instead of running after that cryptocoin. Read a book, maybe one
about successful trading strategies in the stock market. Jared Wesley and Anmol Singh for example run a well coined trading firm and have sufficient material to make everyone worth a successful and profitable stock market/forex trader.
In any case, you should refine your trading and analysis and stop following gurus or subreddits blindly. There is always somebody who wants to push you into a certain direction so they can make money off of you. Keep that in mind.
If I told you buy at 70k, I most likely bought 60.000 and I want the price to go higher risk free. Always keep that in mind when following other peoples advice, that includes everyone.
I hope I have fulfilled my promise of providing a fundamental, trend and char pattern analysis embedded in a realistic framework for Bitcoin. Feel free to comment and like or whatever it is you desire to do as long as it does not harm anybody. :)
If you have any further questions, I'll gladly get down to answering those when I find the time to do so, but I definitely will sooner or later!
Please just note that I will never give detailed investment advice in terms of entries or exits, as I believe every trader should be mature enough to decide those according to their own risk level.
Furthermore you will never see a detailed long or short recommendation from this profile.
I hope you liked it!
Until then, write you soon and trade safe guys and guysettes!
C44
Accompanied by the image of a golden coin this narrative was able to manifest into most traders heads as a "to the moon" of "|almost| secured free wealth creation"
But we are not .
Bitcoin is a virtual chain of blocks - Fair enough, but what exactly does that mean?
Bitcoin is nothing but an accumulation of code lines remotely stored in a giant hard ware complex somewhere in China.
Think about it's mechanism like a physical chain of locks. They are all bound together and need a key to be opened, or a new
lock with a new key to be expanded.
"OO+OO+OO+O+O" where O is one lock.
Now, If I transfer money from Wallet A to Wallet B the following codeline happens:
If Sum [BTCwallet[t1]] != Sum [BTCwallet[t0]]:
func coinTransferToAnotherWallet.
Therefore my wallet knows that I want to conduct a transaction and sends this information to a storing hardware centre.
A so called "Hash" key is produced and added to the coin's block. That know leaves my wallet with two "keys" on. One is mine
and one is my recipient's. Obviously this is all in the block.
Now a true race begins, a race for the reward of 6,5 BTC the fastest calculator receives for conducting this transaction by connecting
this new hash to the already existing block of chains.
For simplicity reasons we are goíng to assume that my computer works fastest. Hence I receive 6,5 BTC to my account, but I only transferred 0,015.
Doesn't matter, the reward is the same, I have to split the coin's block however which makes this "conduction process" we call "mining" take longer and longer
with every little transaction that is undertaken. Some coins are split 1 million times which adds endless lines of codes and sublines of it to it's block.
After about ten minutes like I mentioned I was the fastest, receive 6,5 BTC as a reward and the recipient opens his key via the now secured hash code, sends a signal
back to me stating that he or she |hey women trade as well, right?| has securely received the inquiry to receive 0,015 BTC into their wallet, my wallet automatically
confirms this and allows the amount be transferred and the second key lifted as soon as my signal reaches their wallet again. This is all in the cryptogram and barely takes a
second.
Long story short
My Wallet A
[any Amount with two keys]---II
Transfer to Wallet B
"mining" to add the hash values to the existing chain of blocks [ca. 10 minutes]
Wallet B receives signal and removes one lock
[any Amount with one key left]--I
sends signal via the hash back to my Wallet A
My wallet authorizes the transaction and Wallet B to remove second key upon receipt
sends signal via the hash back to Wallet B
Wallet B removes second lock
[any Amount free to use in Wallet B]--
Now we already see two large problems that arise:
A.) The crypto's blocks of code get super messy and it takes longer than PayPal to do a transaction {Paypal by the way works pretty much the same but without the reward} and continues to take longer and longer with every transaction that is
undertaken.
B.) The rewards system allows for all kind of fraud I will not go into detail here. All I will say is to look at the example above. If I mine and transfer at the same time I can make more money than I actually transferred.
Now we can all conclude that while BTC has tremendous problems, it still works faster than a "classical" bank transfer, but lacks all sorts of regulation. That being sad, I promised a realistic chart analysis and here it is:
***************************************************************************************************************************************************************************************************************************************
Ever since 2015 BTC has risen from 110.08 |Jan 14th 2015| to 65051,07 |Apr 14th 2021| --> that is almost 65.000% it's initial value in just six years!!
It has done so by means of self expansion as explained enough and made a |small| bunch of people filthy rich. Think of that classmate that dropped high school because they put their life savings into this construct early on.
The growth of BTC can be expressed through innovation and conducted research in this field and follows a standard normal distribution as depicted here:
iedunote.com/5-adopters-innovators-adopters-majority-laggards
In all these years BTC showed constant growth and never suffered any existential threats - if you bought below 3.000 USD.
From September 14th to December 17th 2017 Bitcoin showed sudden strong climactic growth driven by a well connected community that basically decided on their own that the future of money was bitcoin, completely ignoring international jurisdiction
and well established monetary institutions. What followed was a pullback never seen in any other asset:
By February 6th BTC had lost over two thirds of it's value and had been reduced to barely 16% the value of the prior all time high by the end of the year.
Many people who had been invested into the asset sold at a loss and turned their back on the once praised "store of value". Beyond the lagging radar of media attention Bitcoin however slowly made it's way back up, trading "fairly stable" in a range of
8.000 dollars until in October 21. 2020, when Bitcoin once again started to suddenly grow climactically, peaking a little more than six months later and is on a desperately needed pullback ever since.
I believe that the pullback we experienced in 2017 serves as a blueprint to what we are seeing now - on a higher monetary level if you so desire.
But what about the future, what does it hold for Bitcoin in terms chart patterns and technical trend analysis?
If you take a closer look at the chart above you will see that Bitcoin is currently trading between the 0,618 and 0,382 Fibonacci levels measured from it's lowest point on March 13th 2020.
Ever since it's all time high it has formed a sharp reversal that transformed into a decisive downtrend only halted by means of strong bullish action shortly before reaching the 0,618 Fibonacci line,|note how bearish volume still prevails| trying to
consolidate itself by means of a double bottom in the 0,5 Fibonacci area - which you should know is not part of the famous sequence. It merely indicates that it's half way from the top or bottom.
Currently we are witnessing a minor uptrend on the one hour chart that has brought us from about 33.000 USD to a bit more than 39.000 USD in the past six days.
If you consider the double bottom only, you will see a bad head and shoulders reverse |take a look at the head, it looks like someone has worked it with a baseball bat|, but if you consider the bigger picture and the long wick that reaches all the way to
just the tick above 30.000 USD you will find a bearish triangle that has room up to about 41.000 USD.
In addition MACD and Stochastics show no signs of |bullish| diversion. Note how MACD is a lot slower to capture the momentum than Stochastics |because of longer periods| and indicating only a flat and slow momentum growth, while Stochastics
has made three crossings already surpassing the 50% mark. To me this is an indicator that the bullish phase will be a short one and that the infamous v-neck pattern we have been seeing ever since the Corona pandemic no longer has sufficient momentum
to cause unsustainable growth that is almost always followed by a climactic decline. It's just how it was designed: Fast |unsustainable| growth is followed by a rapid decline that shakes out most small traders.
My recommendation?
If you are stuck in a long position I would recommend hedging it if you feel like you must hold on to it.
Most traders do not short bitcoin and I respect that. Sometimes however we have to overthink our principles. If we want Bitcoin to behave like a real currency, we will have to accept the fact that it cannot grow climactically due to the instability of prices this growth
causes. Think about it this way: One reason Elon Musk cancelled the payment of Tesla Motors' cars with bitcoin was due to the fact that the prices for the vehicles would've had to constantly be adapted to the price level of Bitcoin.
In April I could've bought a Model S for about 1,35 BTC, whereas now I would have to pay almost two. Sometimes this amount varied intraday for as much as 14.000 dollars. Who is gonna keep up with that?
And what will happen to the real economy if somebody starts cashin' in their BTCs for hard assets. Also remember my transaction example? What if I pay good Elon 1,35 BTC for my brand new Model S while at the same time engaging in mining?
Correctly, I get a free car and reward worth four more on top of that while electricity costs barely one. Thus I will get wealthier and wealthier for spending money and engaging in consumerist behaviour that harms the environment.
That's a bad example hence it was halted.
If you feel like you must trade Bitcoin, get used to the new reality and adapt your strategies to the fact that long boom phases are most likely over. Also consider action in both ways.
For others this might be the perfect time to find new sustainable assets to trade or even take a break to focus on your life away from the screen. It's summer, go enjoy life after work instead of running after that cryptocoin. Read a book, maybe one
about successful trading strategies in the stock market. Jared Wesley and Anmol Singh for example run a well coined trading firm and have sufficient material to make everyone worth a successful and profitable stock market/forex trader.
In any case, you should refine your trading and analysis and stop following gurus or subreddits blindly. There is always somebody who wants to push you into a certain direction so they can make money off of you. Keep that in mind.
If I told you buy at 70k, I most likely bought 60.000 and I want the price to go higher risk free. Always keep that in mind when following other peoples advice, that includes everyone.
I hope I have fulfilled my promise of providing a fundamental, trend and char pattern analysis embedded in a realistic framework for Bitcoin. Feel free to comment and like or whatever it is you desire to do as long as it does not harm anybody. :)
If you have any further questions, I'll gladly get down to answering those when I find the time to do so, but I definitely will sooner or later!
Please just note that I will never give detailed investment advice in terms of entries or exits, as I believe every trader should be mature enough to decide those according to their own risk level.
Furthermore you will never see a detailed long or short recommendation from this profile.
I hope you liked it!
Until then, write you soon and trade safe guys and guysettes!
C44
Note
I just realized I missed an obvious almost symmetrical triangle inside what I described a descending triangle:if we connect the high on February 21. with the highs inside the pennant/triangle, we can get to the conclusion that what we are seeing now has been planned for a longer period of time.
Thank you for making me aware about that FieryTrading
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