MarcPMarkets

Bitcoin: 40,500 NEXT Inflection Point. Chance Worth Taking?

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Bitcoin has taken out the 32,500 inflection point as it pushes all time highs. The next price target (based on a proportional projection) is the 40 ,500 area. Is that a reasonable expectation for the coming week?

If you are not familiar with or unaware of the "herd mentality" then mostly likely you are participating in it. When speculative froth reaches extremes, it looks like this chart. What many don't understand (or maybe don't want to understand) is the misleading reward scheme associated with these situations. Let me explain.

Markets are HIGHLY RANDOM, but NOT always random. There are situations and/or behaviors that are expressed through price action that occur frequently and infrequently (or rarely). For this reason, it is very possible to receive a reward from the market in exchange for behavior that will be much more costly in the long run as a result of a rare situation. Ever hear the expression "everyone is a genius in a bull market"?

One of the worst things for beginners is to make money early in their learning curve. Once the market returns to a more average behavior, anything you make now you will give back to the market, and then some. The best thing you can do is learn how to recognize high probability opportunities while quantifying associated RISKS.

Enough Philosophy! Give Me The Levels!

This move in Bitcoin is rare and will not continue at this rate. Markets do NOT move in straight lines. Entering at random prices or taking break outs on smaller time frames exposes you to the high risk of retrace, especially if you do not operate with a very CLEAR plan.

The 30K and 32,500 inflection points have been cleared, and based on the same proportional projection that revealed these levels, 40 ,500 is the next inflection point. Can Bitcoin run another 6K points from here??? ANYTHING is possible, but the probability is low.

Traders ask me where I think Bitcoin will peak. There is NO WAY to accurately and consistently pinpoint such a level (while many fake gurus will argue otherwise). No chart, no oscillator, and no news will help. The BEST we can do is project potential levels, anticipate a certain type of price behavior and then see if the market accepts or rejects that evaluation. We then ADJUST to the NEW information as the market provides it. That is what leads to effective behavior relative to the market, NOT one's feelings or opinions. This is in line with evolving with market conditions while always respecting the potential RISK.

If you were UNSURE or not confident buying at 24K, 27K, 30K, but willing to buy it now because you are "sure" it is strong, you should consider the risk in terms of market structure, NOT in terms of your own acceptable risk parameters. At this point, IF Bitcoin retraces, the first structural support is the 27,5K area or about 6K points from current prices. Can Bitcoin find support sooner? Sure but there is no way to count on that UNTIL price action provides evidence.

If the current Elliott Wave count is true (Wave 5 of a broader 3) then this move is likely to reverse and can happen at a moment's notice or RANDOMLY. Are you willing to take that chance?

We're not. We trade our rules, and the RULES keep us out of low probability situations, even when they turn out to be highly profitable (like this situation). Keep in mind, our rules are strictly for our swing trade strategy, which is NOT the same as our investment or inventory strategy. Swing trades are very short term oriented (couple of days to a couple of weeks ONLY).

We saw 6 setups in December. We took 3, and profited on 2. Did we leave a few thousand points on the table? Yes, but our successful track record does not depend on home runs, it has been built upon the foundation of consistency.

In this analysis my goal is to provide more of a self awareness as to internal motivations relative to actual risk. Levels and oscillators will not mean much in this situation until price action confirms. If you are looking to capitalize on Bitcoin over the short term, and relying on "instinct" then you are playing a game of financial musical chairs. Hopefully, I shed some light on what to expect when the music stops.

Thank you for taking the time to consider my analysis, I hope you found it helpful.
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Comments

Thanksž
+3 Reply
You are the man. Thank you.
+3 Reply
Marc, thanks a lot. You really help me with managing my FOMO. I exited the market at the wrong time and now hating it and trying to manage my FOMO while BTC went from 18300 to this.
+3 Reply
The market is crazy now.
+3 Reply
thanks Marc
+2 Reply
Such a refreshingly steady approach Marc. As always thanks for sharing your thoughts. I always enjoy reading them.
+2 Reply
Thanks for the dose of sanity
+1 Reply
Thanks for sharing!
+1 Reply
You've made a good call this time
+1 Reply
Thank you Marc!
+1 Reply
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