Intuition
The definition of intuition is the ability to understand something immediately, without the need for conscious reasoning. Sometimes such an attribute is more important than technicals, fundamentals and other metrics utilized to predict the direction of markets. Approximately 2 months ago I published a post about a recent adjustment that I had made to my Crypto economic model. This was the addition of stablecoins, which I believe is now an asset that should be in every Crypto portfolio, especially thanks to DeFi! Stablecoins have generally been used as a means to transact and hedge in times of downward Crypto price action, as well as locking in gains at market tops.
With DeFi comes the additional benefit of earning yield, while hedging your Crypto portfolio at the same time. Although traditional lending platforms such as BlockFi and others have been offering interest on stablecoins for sometime, they are not as high as the yields available in the DeFi space.
The Next Level?
Even though it appeared as if BTC was about to take the next leg up to the 70K - 80K zone, I had a strong conviction to begin the slow and steady move into Stablecoins. However, as I mentioned in my original post, I did not sell any of my existing Crypto in order to accomplish this but rather took profits from trading and yield farming protocols to build my stack. The recent FORTH airdrop also made a nice contribution. I sold the majority of this for stablecoins and held onto 100 FORTH just in case there is some nice price action down the line. This did not imply that I thought the bull market was over but I wanted to secure an alternative income generator in the event that BTC suffered an unforeseen blow.
As it turns out, that is exactly what happened! The recent dump took many by surprise but in reality, it was quite evident. Forget about Elon for a moment, as well as the fact that this dump took place the day after Americans filed their tax returns and turn to the charts. A week ago I explained to my readers that I expected a drop down to at least 35K based upon a massive head and shoulders pattern playing out.
These targets are often over extended, especially in BTC. Scam wicks that dip momentarily and significantly lower than where the price action eventually settles. This contributed to me later writing that even 30K was on the cards. Reading through my thread on Noise.cash, it becomes clear that I was not intrigued by the drop to 39K, as I was expecting further downside. Despite all the FUD, the pattern was forming and the neckline did break. If you are not aware of what is being discussed, or the terms being used it is most likely that you should not be involved in any market. I see people talking about buying dips when technically it is the most foolish thing to do. Why scramble to take advantage of a 10% dip when the charts are telling you that a 40% one is on the way?
I sent this scribble to a few friends a couple of days ago and the daily closed exactly on my target after wicking down to the 30K level that I had previously discussed. Making a trade requires confluence and if you do not have it the odds are against you. Technicals are not 100% reliable but they are extremely accurate and you would need a very good reason to trade against them.
Noobs & Liquidations
Unfortunately most people involved in Crypto make money on a high tide lifts all boats scenario. They have no idea about trading, technicals and fundamentals. This leaves one wondering what actually drives their investment decisions. When you have a flood of dumb money enter into any market, expect chaos! Undisciplined order execution wreaks havoc and inevitably triggers stop losses across the board. Compound this with Musk and a massively bearish head and shoulders pattern and you get a dump of this magnitude. Add a China ban to the mix and it becomes inevitable. Remember that China crashed the market last bull run as well and BTC overcame it. The drop was not as severe but there are more contributors and bigger players in 2021!
In short, this is typical bull market price action, just mildly more severe. The market needs some time to settle before anyone can start calling a bear market or bull continuation. As always these are my views and should not be considered as investment advice. DYOR and remember that all outcomes have some benefit to those who are prepared for them.
