BTCUSD: 4K Break Points To 3K Support?

25 nov 2018

BTCUSD update: Price breaks 4K which is in line with recently developed structure. Since the 4800 break, we have been staying away from this market as far as any new positions. We have rules and a plan which we are not going to deviate from in reaction to recent price movement.

The 4800 area was a major support level that we had been writing about for months. Once that was taken out, Bitcoin has gone on our avoid list. Along with the majority of the alt coins. This means we hold what we have and wait this out.

We were very careful when we were accumulating our inventory and we can afford to take the pain. Although we are short term bearish (because we listen to market structure), we are not long term bearish. We got rid of the weakest alts in our portfolio weeks ago, and only hold the most promising.

Based on the technical structure at the moment, Bitcoin is still poised to go lower. The 3K area is actually where the next relevant support is located. Will it go there? We don't make predictions, we follow price action. It is possible, but it is also possible that price finds support sooner. The key is to let price prove itself.

For us that means bearish trend lines need to be taken out. Until that happens, we will continue to play a strong defense and steer clear of this mess. Thanks to best practices, we stayed away from most alts while Bitcoin was consolidating. As Bitcoin goes lower, the alts will suffer and this was a scenario we did not want to be a part of.

As many are now jumping on the short side, we are not about to start. Leverage is something we have been against using in these markets from the beginning and do not intend to start using it now. Our plan is simple, we wait until conditions become more favorable, and only then will we be open to accumulating more.

Many people treat these markets like the more traditional stocks or forex. We have always recognized that these markets carry much greater risks partly because of their lack of regulation.

This makes them very vulnerable to the games that large players can play. And shaking out the weak in order to buy at the best prices is something they have done for decades in other markets. Many of the techniques that they used are now illegal in traditional markets, but NOT in this market. Collusion, sharing inside information, and forcing margin liquidations are perfectly legal here. That is why we believe this is just one massive shake out over the long run.

In summary, the market has revealed its hand. It chose the break the long consolidation it was in and is now in search of a new level. When a trend unfolds, many will come out and make tons of predictions, but they do not know any more than anyone else. Just like all the "experts" who were calling for 30K during the bull market.

The key to maneuvering any market successfully is not making predictions, but instead adjusting as the market reveals new information. The market is always right and as a trader or investor, it is our responsibility to listen to it, especially when it changes. Our adjustment is simple: avoid. We are not driven by greed or reacting to emotions and not looking to get short in any way.

And next to listening, there comes risk control. We were all about going long above 6K, but we were always cognizant of the possibility that we could be wrong. We wrote it regularly, "anything can happen". Following best practices allowed us to factor the possibility of facing such an adverse environment as we were accumulating inventory. And because of that we can hold.

If Bitcoin is going provide value in the future, it will eventually find a support, build a base and gradually develop a much more favorable environment for longs. Now it is just a matter of waiting for the process to play out. There is no need to keep buying into something that has proven weakness. There will be plenty of opportunities to buy when the evidence of broader strength returns.