Over the past few weeks Bitcoin has just relentlessly continued to push higher. Coming off the 3800 level, it has been a relentless rally of sorts, but all good things must come to an end. Yet maybe just maybe we are not done yet!
My theory is quite simple, dumb money has mostly sold out of their positions. By dumb money I do not imply that someone is dumb, I am using the the term for the traditional retail investor. Smart money is considered institutional or larger operators that have the means and ability to access information the retail investor and trader do not. In addition they can use news media and other channels to scare dumb money out of their positions.
I can guarantee that more retail investors have sold out since 5100 than have bought in. This implies that larger institutions and traders are the ones still buying. But why? That is the correct question, yet many are ignoring the obvious, and are simply focused on the FUD.
While the herd continues to focus on Tether and the Binance hack, and sweat over moving their 1500 TRX coins off Bitfinex they continue to ignore and underestimate a fundamental game changer for the space. Traditional stock brokers are preparing to offer Bitcoin (along with some alt-coins) on their platforms in the near future. I am not just talking one or two, but many. We heard about E-Trade, TD Ameritrade and Fidelity recently, but as I was making some modifications to a couple "motifs" on Motif Investing I noticed, they too are going to offer crypto currencies on their platforms.
Motif is an interesting platform that allows the investor to create their own ETF. You can chose up to 30 stocks or ETF's and put them in a motif creating your very own ETF. Perfect vehicle for the long term investor to have a basket of stocks for which they can add a couple hundred bucks a month too. This is important because this type of investor is not an active participant, meaning once they buy, they just hold. In addition it will allow you to make your own crypto motif (ETF) allowing a quick diversification tool. Too cool!
So you have some of the most widely used exchanges preparing to offer Bitcoin and a few other alt-coins to their platforms. This will bring fresh money into the space, and a lot of it. I was at a charity gold tournament last weekend, and all 3 in my group were interested in buying Bitcoin, but none were not comfortable with buying it on Coinbase. Just look at all the FUD. They simply do not understand. However if they can buy it in their TD Ameritrade, E-Trade account or Motif account, hello! Even those who still think it is a scam are going to think twice when they have it accessible on their platform.
I have been mentioning since last year, that institutional and large operators were likely accumulating during the bear market. They were not worried about the dip to 3200, they just kept on accumulating. They are used to investing into companies at pre-IPO prices and holding for 2-3-4-5 years through the pain. I know, I know you guys are hammering this market shorting and daytrading. How is that working lately? Been awful quiet in Bear valley!
These large investors understand that once these products hit the retail exchanes, the payoff will be great. Like getting in 3 years ago, on Beyond Meat. The fact Bitcoin continues to grind higher, and short interest is not squeezing yet, adds further weight that larger players are getting a head of the potential boom Bitcoin and others will have once they hit the mainstream investor.
After all who do you think is buying here? "That guy" that has been locking in profits since 4200? He is sold out now. Or all the "expert" analysts on TV that were calling for a top? They sold out and are short. Or what about "that guy" calling for a 30% correction? Ohh he is bullish on crap coins now, because they are discounted 98%. As the ticks tock, the amateurs flip flop. This is why most professionals prefer the long game. Markets trend up over time, there is no need to complicate it.
Technically:
Though the area of resistance is between 6000-6500, we are still along way from the 38.2% retrace of the overall bearish swing. This is found at 9500. As momentum starts to pick up I would not be surprised to see a move into the 6800-7500 level before we get a pullback. In the interim, 6500 is the next technical level, but lets zoom out.
The 6800 area is a major level of resistance as it was resistance and support early to late last year. As Marc mentioned in his article last night, this is an area where many bought and may look to exit positions. The question is not when and where we reverse, we know this eventually will happen, but what kind of a pullback can we expect?
If we push into the mid to upper 6k area, the 5100-5500 area is going to be an area to look for reversals. If we pullback in the next day or two, the 4750-5100 area is likely to be met with buyers. Yes all those buyers that "Sold Out" are now feeling the emotional heartache of selling too early. They will be looking to re-enter, and the higher it goes, the more impulsive "that guy" will become, to buy any dip.
This will especially be true if it pushes into the 7k area. Ohhh the heartache will be like the Hillary Clinton 2016 Presidential party. Break out the kleenex, because there will be many alligator tears. There will be accusations of Whale Collusion, Cheating through Manipulation, and of course none of the blame will be on their lack of how markets work in the long term.
Of course it is good to have some cash on the sidelines in the event we do get a pullback in the near term. So depending on your position and means, there is nothing wrong with fading the rally here.
However, nothing on the chart cries get out, other than a few "TA's that were yelling "SHORT" for weeks, have been trolling for months, and they somehow seen the light and have gone LONG. (Here's your sign) We should keep in mind after a move like this we may not get much warning of a pullback, and it can be swift. If you can not take the pain of a pullback, well, trim a little off the top here.
In addition we are just starting to see shorts exit. This may add some fuel for a squeeze higher, and provide enough momentum to hit the mid to high 6k area. Only time will tell, but it is surely on its way, and as shorts are squeezed momentum to the upside accelerates.
Summary:
My personal opinion is that any pullback is a buying opportunity between 4900 & 5300. This is not only a technical area, but one where many sold their coins too early. Though 4500 is still possible, it is becoming less probable as the market moves higher.
In the end I am not selling yet and may not sell at all. I am looking to buy the dip!
Whether it is in the next couple weeks or the next couple months, Bitcoin is going to be more accessible to more traders and investors than ever before. When platforms are advertising "coming soon", "register now", and have cryptos listed on their products page, the last thing I want to be is standing at the end of the line and its "ALL SOLD OUT" @ 5k and I am paying scalper prices.
After all, this is going to provide access for 30-40 million MORE US retail traders and there are only 19 million tickets to the show! I want to be the scalper and not the scalpee.
Comment
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Since we mentioned the trade at 5140 publicly on our show and over the past couple weeks we feel obligated to inform those that have been following this trade, that we are closing half the position we bought at 5140 out. This still leaves us with half the position if Bitcoin continues to rally, but also locks in our gains. I mentioned I many not sell, but after Marc and I went over a few charts this afternoon, we thought it was best to lock in something here. There were several reasons for this, which we will update later.
I've been wondering why shorts have not been seriously squeezed in a clearly visible way and I came to realize that the short interest does not have to go down dramatically for shorts to get squeezed. "Dumb money" shorts can get transferred to "smart money" shorts who basically gather up weak shorts at the right time, while the overall short intererst remains relatively unchanged. This allows the smart money to beneft twice, once with their longs on the way up, and accumulation of shorts as we near the top in preparation for the decline.
"Smart money is considered institutional or larger operators that have the means and ability to access information the retail investor and trader do not. In addition they can use news media and other channels to scare dumb money out of their positions."
Well said. But, in the alternative, they can also scare dumb money into long positions when a correction is imminent. No?
The thing that concerns me about anything read in pop media is exactly what you said: smart money can use the news media and other channels to manipulate the market in BOTH directions. So whose to say they are not using it now to get people buying into highs so they have plenty of buyers to unload their bags with all the news about trading desks offering crypto "in a few weeks". Sounds awfully reminescent of repeated promises of ETFs.
And this is important: if this news is genuine, why on earth would they want to broadcast it? They are giving away their edge. If I had access to this information, I would definitely keep it under wraps, load my bags to the limit at bargain basement prices, then make the announcement across all media outlets when I wanted to pump the price and unload my bags. Sun Tzu and the Art of War.
In short, you can't put too much stock in anything that comes out of standard news outlets for the reaons you mentioned. Might be worth asking how this information is intended to alter one's behaviour...
Does this mean that prices won't go higher? Of course not. Anything is possible. But the market is heavily over-bought, and forests of resistance lie ahead. A correction is due. The path of least resistance right now is down...
goldbug1
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@dalmazio, I'm not sure the herd is getting scared into long positions, quite the contrary, across the Facebook blogs, TV blogs etc, they are selling not buying. So though I agree with your premise, I am not sure this is what we are seeing.
I do like your comment on short interest, and I had been thinking about that, and it could be miners or larger players hedging anticipating a pullback where they will cover. However this is a neutral position and it only works IF the market pulls back enough to close out your short position. I'm not so sure it will at this point, but you have a valid argument and one that I was pondering myself.
Are institutional traders fading the rally? quite possible but then who is doing all this buying? Could be another OKcoin scenario where it was one large trader and he was liquidated but the exchange did not have enough to cover. Maybe there is another cover up, but yes, it is odd that we have not squeezed up $1000 + from where we saw short interest momentum increasing.
goldbug1
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@dalmazio, Also it is not the media that is saying this. It is the exchanges sending notifications out to their clients that they are going to offer these products. I agree when you see an article on coinbutt.io that "allegedly" blah blah blah blah, but this is coming from the horses mouth. So I take this with more than a grain of salt, that we saw previously. Also I have a theory on why the ETF has not been introduced and the trading on regulated and exchanges that can be monitored with surveillance, brings the possibility that an ETF finally does get introduced.
All great points, thank you for the respectful alternate opinion.
mbc47
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At some point the mass turns and takes profit, then you cannot stop it going down :)
Typical bubble shit, how can people be serious about this?
BradTrimas
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@mbc47, Since Bitcoin is in a perpetual bubble there is no need. Accumulate when down, and hold and take profits when need be. Buy at Historic lows and sell at Historic highs if you like. I am betting on the actual tech without plans of selling.
mbc47
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This market is joke. You are just betting blindly on an empty box and praying the whales will agree with you. There are no fundamentals or TA that matters here. Sure, you can still make money if you guess their moves, but you can be wrong on the next turn and loose everything. As it happened before to many, and you think it will be different? Nope.
mbc47
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Buffet is absolutely correct to call it: “Gambling Device”
mbc47
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The real disbelief and dumb money is the one that goes in it and never comes back. The smart money comes back :)
Do not bed that big brokers will recommend crypto investment for a long time :)
goldbug1
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@mbc47, that is your opinion, which is fine. If you do not have the money to invest in speculative areas, than find a good dividend stock and leave it alone. If you don't understand the risks that's your fault. And yes I can be wrong, but that is a risk I am willing to take. No risk no reward. There is a bond market if you don't have the stomach for it, and everything repeats until it doesn't. Reminds me of Sept2017. It just kept grinding higher!
mbc47
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@goldbug1, you see - I do have the money, and have taken risk, and have made some money here, and still - i have gambled.
Just look at moves :)
People are way better putting their money in regular stock.
I'm not saying this to spread FUD, and it is only my opinion. Folks, do not throw your money away. You did it before. You know this ;)
"Smart money is considered institutional or larger operators that have the means and ability to access information the retail investor and trader do not. In addition they can use news media and other channels to scare dumb money out of their positions."
Well said. But, in the alternative, they can also scare dumb money into long positions when a correction is imminent. No?
The thing that concerns me about anything read in pop media is exactly what you said: smart money can use the news media and other channels to manipulate the market in BOTH directions. So whose to say they are not using it now to get people buying into highs so they have plenty of buyers to unload their bags with all the news about trading desks offering crypto "in a few weeks". Sounds awfully reminescent of repeated promises of ETFs.
And this is important: if this news is genuine, why on earth would they want to broadcast it? They are giving away their edge. If I had access to this information, I would definitely keep it under wraps, load my bags to the limit at bargain basement prices, then make the announcement across all media outlets when I wanted to pump the price and unload my bags. Sun Tzu and the Art of War.
In short, you can't put too much stock in anything that comes out of standard news outlets for the reaons you mentioned. Might be worth asking how this information is intended to alter one's behaviour...
Does this mean that prices won't go higher? Of course not. Anything is possible. But the market is heavily over-bought, and forests of resistance lie ahead. A correction is due. The path of least resistance right now is down...