"Here we are, face to face, a couple of silver spoons..."
Ahhhh, nostalgia. It hits you when you least expect it. Funny how, if you just go along with your own stream of consciousness, the strangest things come to mind. I really wasn't a big fan of the TV sitcom "Silver Spoons" but it took a long time for me to finally ask someone what the phrase actually meant. I mean, what a weird way to say someone was rich.
For whatever reason, the theme song popped in my head the minute I started writing this, so you are now a part of that thought process; welcome to my 'unique' mind. :-)!
Why, Gordon, why? Yeah... the reason my brain supplied a seriously buried soundtrack to this exact moment in time, is because the one truly redeeming value to that show was Ricky's super cool race car bed. I wanted that bed. I didn't realize I wanted a rich kid's race car bed until I saw it, but once I locked on to the fact that he had one and I didn't, oh it was on. lol Mine was very comfortable and I slept much better than adult-me usually does, but it wasn't 'kewlllll'. It was just a bed. I mean, what did my bed say about me?
Envy; not a pretty color on anyone even if some do look nice in green.
In irony, my subconscious likes to poke fun at active-thinking me. Now that we're a good 100% climb away to the peak ATH's again, I'm drawing from prior memories in the market and where I was when they happened. I've adjusted my thinking and strategy every time the market played its whimsy upon the masses and its helped me continue long stretches of quality trading, careful to leave more and more reserves for taking advantage of extreme drops. That's nice and all, but you still feel the ups and downs, whether anyone in your social media feed pretends it doesn't phase them or not.
I'll talk about one time in particular that really stuck with me a couple of years ago. I remember when BTC/USDT volume on Binance was first hitting around $100M every day, and $200M was healthy. $300M meant there was a lot of money to circulate and crypto was growing a wider audience; all good things. So, it was a huge deal when we saw the first $1B trading volume on the same pair, and holy canoli $2B was unimaginable.
Somewhere around the $300M mark, things had gone down and sideways for weeks on end. The little peaks in the market were pretty small and sentiment was just a feeling of laziness and lack of enthusiasm. I think it had taken a lot of wind out of people's sails to watch waves and waves of new tokens hit the market, all for them to perform horribly in the months to come. It really was starting to look like CZ was just running a pump and dump mill with no end to the carnage in sight. It started seeming more and more like every new project wasn't actually going to save the world, or at least change it dramatically. It made it worse that billionaires like Cuban and Musk made seemingly idiotic predictions about the market that made little sense at the time (and still don't today).
During that particular stretch, I remember watching the volume go from $300M to $250M, then $200M, over days and weeks it was down to $100M. In that time, Bitcoin had numerous days where the entire high/low was barely more than $100 change, and usually that was establishing gradual new lows each time, which meant there was very little room for anyone to be earning off the volatility at all. People were seriously wondering if crypto was simply an idea that had its run and was getting stomped out by the crappy governments of this world.
The point I remember the most was when that volume, again just a metric on Binance, single pair BTC/USDT, was down to $80M. It was like the doctor coming in to tell the family "we've done all that we can do for him. From here, all we can do is make him comfortable". Well, looking back we've now had numerous $2-4 billion dollar volume days on that same pair, and the price is sagging at 9X what it was at that low point. It's all about perspective, and no matter how it felt at the time, I continued to watch the market every day, with the same interest at what came next even though it felt slow, sad and lonely in those times.
It's amazing to think that I've done this just long enough that a $2800 Bitcoin had me concerned that people were simply fatigued by this whole crypto thing, and $3800 was a message that under the terror of a global outbreak, oil barrels could literally go negative but no one was letting Bitcoin go lower than around $4K. In those times, we saw Bitcoin at $8K and $13K peaks, and neither of them were near the ATH that had happened just before.
Imagine that poor guy who refused to listen to their buddy about Bitcoin until $19.5K when Bitcoin first reached its highest peak. Hard to imagine, but Ether was only 2 years old, so people had very little perspective on whether the second project by price and volume could potentially 'flip' Bitcoin. Every single new project was just fresh blood in the crypto market, and almost every new coin project seemed like it was seriously about changing the world, and CZ sure made it appeared as though a seriously thorough research evaluation was required if a coin was going to get listed on Binance. Little did we know that by the end of 2018, 90% of the market was 99% under and HODL bags were now a fashion statement for everyone living in the bear market.
A lot of people were out... permanently out of crypto. What was the point of going in if everything could just keep dropping by that much? Many of us said, "hey if I'm this crazy, then I'm going to focus on re-adjusting a strategy that seems to be working, and either the market will start trending upwards again, or I've already lost 80% value while the rest of it is almost all built on the profit I've been earning all this time."
Other people who were completely sold on specific coins as opposed to 'crypto' in general, seemed completely un-phased by the massive drops, really until March madness ala Covid-19, where no one on the planet knew just how bad things could get if there was zero travel and most people suddenly weren't allowed to work (again, except for barbers and liquor stores- lol).
HODLers have a mindset that everyone can learn from. You know, even Mister Diamond Hands Warren Buffet sold off his airline stocks that he swore he'd hold until Armageddon day.
I honestly don't know if we are in a bull market with a weird sense of humor, or if this has been a bear for some time, and there are many signs to the latter. I'm going to include a little bit of analysis in this mostly "Gordon thinks out loud" editorial- that comes in a bit...
There's an adage in trading; buy when everyone is selling, sell when everyone is buying. They also say to be greedy when everyone else is afraid. It all means the same thing: Buy Low, Sell High. And, if it were that easy, none of us would ever be suffering come valley time.
In a bear market, it isn't just about the price going down or losing steam. Just as much, it's the uncertainty of how much capital is available to buy things at the best time. That's what is incredibly difficult to accomplish. You can brag about "never selling" all you want, but the more you believe in an asset, the more frustrating it is that you don't simply have unlimited funds to buy it once the bear growls. A lot of people "stack sats" on a regular basis, often with an automated DCA, or dollar cost averaging. This is known to be a safe, mathematically sound way of grabbing a good average price over the long haul, but in my opinion, the more volatile a market is, the better it is to try and play your DCA by going for the valley within each segment of time, and having a small reserve principal ready for the deeper dips.
Some HODLers are deeply offended at the idea of trying to sell any of their asset at the top, as if it is a betrayal of their super-fine crypto to dip back into dirty, filthy fiat piggy land. The thing is, though, if the goal is to acquire more coin, once again, unless you have unlimited funds coming in, one of the better ways to do so is to realize at least some profits, and re-invest them when the price gets low. You aren't soiling yourself to take some fiat at the top and put it back in to grab more coins. But, if the HODL is solid and the trading strategy is simply uni-directional, then the only way to go is to add to the stack during valleys and accept that sometimes the valleys have their own valleys in addition.
Being a bull during a bear cycle doesn't have to mean being delusional, but it does mean you will take more and more comfort in the confidence you have in your assets if you use multiple perspectives to add to your knowledge base.
For instance, if you only look at the short term, you may panic that there is no way to tell where the trend is going. Every time Biden says something stupid, there's a good chance the market will tank a little. That really could take Bitcoin to zero! No, I doubt it. Every time Gensler says something threatening, it tanks a little. Where is the bottom, and was that "buy the dip" really about to become the new lower high? Did support just become new resistance? If so, the more you are able to accumulate your chosen assets at those times, meaning you have fiat of some form, the better it will be once the trends do start to reverse.
When you look at the medium time length, you will see an obvious pattern of what you've been going through the past lets say 3 months. Usually, you can attach "where was I when 'x' happened" and remember that dip #1 looked like the bottom at the time, but now it looks SOOOO high up there compared to what came next. "If I had known... then..." should be the name of an indicator, but I don't think it is. We'd all make different choices if we had instant hindsight for everything we did at market, and really in life.
When you zoom out and look at the past 12 months, the worse the blood bath, the more incredibly obvious it will seem that we've been tumbling down the right side of Mt. Everest for months and months, and it will appear incredibly obvious that it's a loooooong way down before we actually hit bottom. But the truth is, it is absolutely impossible to know where the peak is, and where the absolute ground floor will be.
A few things that will serve all of us well
Learning a lot of important data on your assets is a good thing for future planning. Know the people, the coding team, the general long term sentiment, and understand the player's stats. Like a baseball player; knowing their RBI and other averages tells you a lot about what the next season may hold. Knowing your asset's history of highs and lows, all time highs and all time lows, how far the drop was after each bear, and getting a feel for how long it sits at some temporary average, will help guide you as to whether it is a good idea to buy more now or later.
Also of great importance is to pay attention to volume. Many people in crypto are, how do I say it... weird about volume. The HODLer is often insulted by "traders" that talk about liquidity and volatility, and there is a disdain for those who talk about marketcap especially. But, these are things that successful, well-paid traders understand for one very important reason: sentiment.
If there are massive buying opportunities in low bearish price points and very few people are taking advantage, it might be a sign of several things. First, it could be that a ton of money was simply liquidated from the market. This means that people have been taking part in risky behavior for far too long. They got swept into the bull mentality so much that they added too much leverage to their positions, went too long in their longs, or even worse listened to everyone talking about future contracts (thanks, Gary!) and derivatives so much, that they forgot why there is so much interest in the underlying asset.
It may be boring to just stick with a few things you're willing to trade. It may be boring to stick with spot markets instead of adding more to margins for a bigger payout, but if the market is eating up liquidations, that means some of the true believers are taking risks they shouldn't, and now they "believe" in the asset in the valley of the pump, but they simply don't have the money to risk. That's bad news.
Low volume at low prices can also mean people are simply believing the fear, that things really are bad and about to get worse, and the last thing they need is to get further in the negative. People really do kill themselves in bear markets. It isn't any laughable thing. What a tragedy for people to go through, that they had so much of their faith in shaking a money tree that they felt it mattered more than their soul to winwinwin.
Low volume can also mean that there's an expectation that the real value position hasn't arrived, and that's the one that I see in crypto for top coins more often than not. When the whales move, it will be exceedingly obvious. When some of the big hands are convinced the bottom is in, there is always massive market buying and OTC positions we don't see. Then, whoever still has diamond hands piles in on top, and over months to follow previous averages are earned back and everyone starts to regain their confidence.
My biggest concern for people is that they don't allow for the massive fluctuation and they don't understand the purpose in taking some profits, even if they are a hard line HODLer. The goal for all of us, the longer we live in this crypto market, is to have enough value to be able to increase the rate of acquisition. Most people did not get a ton of early Bitcoin to simply hold on to. We have to kick and scrape and sell, borrow and trade to acquire more. It is not easy to do, regardless of what we can see looking back. But, if we allow ourselves to be overly sentimental when things are beautiful, chances are good that we won't have the principal needed to buy the dip.
As I've said recently; perspective is everything. Right now $35K may look incredibly bearish and weak for Bitcoin, but the truth is Bitcoin is still $7K higher than it's prior peak of $28K (before its ATH of $68.5K). As we roll forward together, remember that it takes a while before total clarity offers us a hand, and if you cannot afford to assume the bottom is in, leave yourself some room to keep DCA'ing in on the way down, because it could be a few more weeks, or even months. The world is a nasty place out there, with deceitful political entities and threatening signs of war and unrest. Markets are incredibly skittish when there's any bad news, and overly enthusiastic when things are good. Assess every opportunity not just for the potential upside, but also for the mindset to be prepared for what might come next. There's a good chance that none of the experts guess it right, so leave room for every bad call; the next dip may be just around the corner.
And on that note, hopefully an encouraging one, Crypto Gordon Freeman, for now... out.