Your Bitcoin ATH Guide. How Did We Get Here and What's Next? #47
Market Meditations | November 30, 2020
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Bitcoin Bounces Back. How Did We Get Here and What’s Next?
Market Meditators, it’s been a roller-coaster few weeks. In today’s free article let’s:
Recap this weekend’s price action and why some traders thought it was a bull trap
Discuss the Bitcoin All Time High and look ahead to what we can expect in the following days
Look further out and welcome the potential entry of a new coin that rhymes with zebra
Bitcoin Rising During Weekends? Bull Trap!
Let’s begin with the weekend.
In terms of price action, there was certainly a case to be made to hedge some of your exposure during the weekend. It was reasonable to think that bitcoin would get rejected during the bounce and revisit the $17,000 as support once again. By using the Fibonacci retracement tool, traders could easily draw some important resistance levels on the chart to watch and use them as potential levels to take some profit. $18,100 – $18,400 was considered the most important area by most traders, as there was confluence with the 0.618 Fibonacci retracement level. A break above invalidated most short-term bearish biases and indicated that bulls were fully back in control. Bitcoin briefly retested the level once it broke upwards but started running soon after, as indicated on the chart below.
So why was this called a bull trap?
Well, during weekends, price action in crypto is considered less credible as volume tends to drop due to institutions and other big players being less active in the market. It requires less capital to move the market and bigger players, aka whales, sometimes take advantage of that to mislead market participants or take out stop-losses at obvious levels on the chart.
Bitcoin Flirts With New All-Time Highs
What came next?
The Bulls took full control on Monday. At the time of writing, bitcoin broke through its 2020 yearly high and is flirting with new all-time highs (ATH) on most exchanges. Given that this level is watched by every market participant, we’ll likely see volatile trading conditions for the rest of the day and possibly the entire week.Depending on today’s daily close, it is possible for bitcoin to break above $20,000 this week and enter price discovery once again.
Because of the volatile trading conditions at the top three years ago, every exchange has its own ATH to break. Some exchanges already broke their ATH today, but to fully trust the breakout, I would like to see the price being accepted above $20,000 and possibly higher. If we see daily and weekly closes above this level, we’ll likely see this major resistance level turn into a new price floor and thus act support as new entrants FOMO, to not be left out for the remainder of the trend. It goes without saying that today’s price action is incredibly bullish and very few arguments remain for short-term bears out there. As I tweeted out earlier today, every single bitcoin buy that managed to hold is now in profit.
Looking Ahead: Stablecoins and The Future Of Money
So the weekend was great. Monday was great. What waits for us further beyond the horizon? One thing I think we should take some time thinking about is the future of money.
It was last week’s news that Libra,the stablecoin developed by Facebook, is set to launch in January next year albeit in a limited format. Real vision founder Raoul Pal shared the article on Twitter saying: “the fear (of digital currencies) is real and it is stablecoins they see as the threat, not bitcoin”.
The market is telling us something and the digitalization of currencies is real. The coronavirus pandemic has dramatically increased this trend and the topic has evolved from being niche to something that can no longer be ignored, neither by Wall Street or governments.
Christine Lagarde, President of the European Central Bank, published an article on ‘the future of money’ today in which she articulated her thoughts on the digitalization of currencies and how stablecoins, if widely adopted, could even ‘threaten financial stability and monetary sovereignty.’
In particular, Lagarde reaffirmed her concerns for stablecoins backed by global technology firms, as they present risks to ‘competitiveness and technological autonomy’ in Europe by leveraging their competitive advantage and control of large platforms.
The genie is out of the bottle and there’s no stopping this trend. Nobody can predict how governments will respond to this technological innovation but the crypto market as a whole will almost certainly benefit from the increased attention it’s been getting this year, at least in the long-run.
So, let’s wrap it all up. It’s almost as if last week’s correction never happened. Just like that, bitcoin is trading above $19,000 again flirting with all-time highs, bouncing almost 20% from the lows on Thanksgiving. This has reaffirmed what we wrote on Friday: that it’s important to keep perspective and realize that, in a bull market like we’ve had the last couple of weeks, red days like Thursday generally provide incredible buy opportunities as opposed to a reason to panic sell. We have described the current bullish picture but advised that to fully trust the breakout, we would like to see the price being accepted above $20,000 and possibly higher. The final section considered what waits beyond the horizon and the increasing adoption of stablecoins. Another long run benefit for the crypto market as a whole.
Guggenheim Opens Door to Bitcoin Exposure for $5 Billion Macro Fund via Grayscale’s Gbtc. Guggenheim Partners, a $200 billion-plus asset manager, could be the next Wall Street institution to allocate capital to the crypto market. Guggenheim invests across asset classes on behalf of companies, pension funds, and sovereign wealth funds and on November 27, a filing with U.S. the Securities and Exchange Commision (SEC) indicated that they might “seek investment exposure to bitcoin indirectly” via Grayscale’s Bitcoin Trust product (GBTC). Read more.
Yearn Merges With Cover, DeFi Protocol’s 4th Deal in a Week. Yet another merger for the decentralized finance (DeFi) protocol Yearn.Finance this week. In the announcement of their 4th deal this month, Yearn said that “developers have been working with Cover Protocol devs since inception, so this collaboration comes natural for both.” Yearn will continue to focus on its best-in-class vaults, while cover becomes the insurance provider for the Yearn product suite, as well as for DeFi as a whole. Earlier this month, Yearn also announced partnerships with Pickle Finance, Argent and Cream Finance. Read more.
Tesla Starts Week With a Gain Ahead of S&P Index Decision. The company’s impending entry to the group of 500 companies has led to a buying frenzy in its stock and on those of other upstart electric vehicle makers, leading to a more than 40% jump in the company’s share price just since Nov.16 when the decision was announced. Tesla shares rose as much as 3.81% on Monday, touching a record high of $607.80. The company also won Chinese approval to start selling its Shanghai-assembled Model Y SUVs in the country, a development that can further lift shares. Read more.
Ripple Is Selling a Part of Its Stake in Moneygram for the First Time. Ripple is selling one-third of its stake in Moneygram after investing in the remittance firm last year. A filing with the SEC revealed the development in which it authorized an unnamed financial institution to sell up to 4 million shares of Moneygram. A Ripple spokesperson said “This is purely a judicious financial decision to realize some gains on Ripple’s MGI investment and is in no way a reflection of the current state of our partnership.” The two firms partnered last year to leverage XRP in forex settlements as part of Moneygram’s cross-border payments business. Read more.
Markets Risk On: Gold and Dollar Weaken While Equities Rally. The dollar is set to post its worst month since July after vaccine breakthroughs boosted investor confidence and the global economic outlook, pushing the haven currency to its lowest level since April 2018. Other safe haven assets such as gold have suffered from the switch to ‘Risk On’. Bullion extended its slide below $1,800 an ounce. The moves deepen a wider pivot into risk assets in November, with global stocks heading for a record month. MSCI’s index is up 13.1% this month, having touched an all time high on Friday and Europe’s benchmarked Stoxx 600 index is also up 14.9% in the month. Read more.
Tuesday, Dec 1.
Launch Ethereum Phase 0:
The Minimum threshold for deposits was reached and Eth2 will launch phase 0 tomorrow. Phase 0 contains all of the mechanics behind eth2’s PoS consensus, it tracks the validators and their balances.
Fed’s Chair Powell Testifies:
Federal Reserve Chair Jerome Powell testifies before Congress. Subject matter: Coronavirus Aid, Relief, and Economic Security Act. Live stream available.
Wednesday, Dec 2.
Horizon (ZEN) Block Reward Halving:
According to the timer, Horizon will reach block 84,0000 in less than two days. Block reward halvings are generally considered to have bullish implications for the token price as inflation drops by 50%, meaning that less supply is being mined thus reducing the amount of tokens that gets sold by miners in order to recover their costs.
Big Syscoin Announcement:
Details are not known, but Syscoin tweeted about ‘Big @syscoin related news’ earlier this month which would be revealed December 2nd, 2020, before 13:30 UTC.
Friday, Dec 4.
US November Non-Farm Payrolls:
The big number everyone focuses on. Shows the number of non-agricultural jobs gained or lost in the prior month. Although notoriously difficult to predict, consensus for November is 520,000. This comes in weaker than previous months due to coronavirus cases.
Key Habits of Successful Traders
It was all a bit touch-and-go there with Bitcoin last week. Only to be back at ATH this week.
Markets can be volatile. There is no avoiding it. The best we can do is develop habits of successful traders. Whether the market is bullish or bearish, there are steps we can all take to ensure we are on the right trajectory towards building richer lives. Let me summarise them for you.
Trading with a plan. Sure, you may have some short run successes winging it but the day of reckoning always comes. Always trade with a plan: plan of attack for each position, including position size, entry point, stop-loss and take-profit exit. Whilst you can be flexible with your take profit, you should never really adjust your stop-loss.
Maintaining technical analysis. Even if you are not a technical analysis junkie, you should really know the key technical levels for what you are trading. For instance, the key Fibonacci retracement levels, where moving averages are, where short and long term trend lines are and the most recent major highs and lows.
Taking Profits and Stop Losses. As the saying goes: bulls and bears each get a seat at the table, but pigs get slaughtered. Be sure to take profit from time to time. Everyone loses money trading, what makes you seriously lose money is not having a stop loss. Can’t stress this one enough.
Watching legacy markets. We talk about institutional investors increasingly being interested in the space and the bullish implications for bitcoin. That’s all well and good but let’s take a second to just digest that: institutional investors are entering the space. When you trade, and look into your screen, imagine a mirror, and all other traders looking back at you. Except now, imagine hedge funds and asset managers. It is worth taking time to understand some of what happens in legacy markets as it will allow you to understand what drives the behaviour of the new entrants into our market.
Looking ahead. Think of trading as a game of chess. You need to think several steps ahead of other players. Consider how much the market has or has not priced in an expected outcome. Also consider what may happen if the outcome does not materialise. While everyone is scratching their heads thinking what to do next, you will have already established a game plan.
Keeping emotions in check. This isn’t about being right or wrong. It’s about making money. Do not cling to a losing position or wait for the market to take you out of a trade. React logically and quickly to cut a loss making trade, in line with your trading plan.
Being all over the news. A lot of what we cover in the Market Briefing section can move the market. As well as carrying out technical analysis, a successful trader will keep an eye out of news events and the latest developments in the space.
And there we have it. If you can make a bit of progress towards each of these habits each day, you will soon see the benefits. Good luck.
Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.