Bitcoin (BTC) got seriously smashed last night. Bitcoin lost 12 pct from $7350 to $6450 in some 12 hours. How concerned should crypto investors be? The answer is simple: Bitcoin continues to trade in breakout territory on its long term chart, even after today’s selloff.
In fact Bitcoin’s sell off was a double decline, first from $7350 to $6950, then followed by $6950 to $6450, both in 12 hours. Although Asian trading hours typically tend to show (strong) rises during the day it now as the opposite that happened.
Things can go hard in crypto land, not only to the upside (last year) but also down (as lots of investors experienced the hard way in 2018).
How concerned should crypto investors be? What does this mean for altcoins which are selling off even harder? Two separate questions, let’s address them one by one.
Bitcoin’s trades in breakout territory. Reason to be concerned with this selloff?
We believe any intuitive reaction to look for news in why and how Bitcoin declined is meaningless. If anyone is able to submit a good news item or article that ‘explains’ this selloff we are happy to read it. But news is simply not designed for this.
Our ‘start with the chart’ principle is the only one that applies until proven otherwise.
So far, Bitcoin’s daily chart continues to show some sharp moves up and down. That’s why we have to zoom out to find the big picture trends. Only once big picture trends are damaged is there really reason for concern. So overall we stick to our End of 2018 Bear Market Confirmed, Buy Signal Confirmed statement from last month as well as our 5 Must See Charts Confirm Bitcoin Bull Market Of 2018.
Right now, even with the 12% selloff of last night, the long term trends and patterns are still intact.
On the one hand support levels were not damaged, not rising support nor horizontal support.
On the other hand the breakout from last July was not invalidated neither.
Most likely Bitcoin is doing another test of recent lows. It might even become the 7th test of the important $6k level. Note as well that $6k is not a price point, it’s more of a level (say $5.6k to $6.2k).
Bitcoin’s selloff: what does it mean to altcoins?
Most altcoins have been selling off harder than Bitcoin. That makes sense, as there was also (much) more leverage to the upside. Remember when Bitcoin was rising fast end of last year? Altcoins were rising faster.
The point we are trying to make is that Bitcoins is the leading indicator. As long as Bitcoin remains in its long term bull market it will certainly help altcoins recover at a certain point once bullish momentum returns.
However, our stance has always been that 80% of altcoins is worthless. You better do not hold them as, over time, with each and every selloff, they will gradually lose more value compared to the ones that do deliver value.
For now we see no reason for crypto investors to panic as long as they are invested in the ‘right’ cryptocurrencies. As long as Bitcoin trades above $6k, with secondary (and strongest) support at $4.5k, there is still a long term bull market, and the strongest altcoins will eventually recover!