Bitcoin Price Breaking Down? The Importance of Zooming Out.

Everytime Crypto moves down for a few days to a couple weeks, it's amazing how many doubters and naysayers come out of the wood works exclaiming how it's just going to burst, burst, burst, or that it has JUST burst.  And during our current brief downward trend we have financial institutions, like Goldman Sachs, providing their input reluctantly because their customers are demanding it. 

LESSON 1: Look for Repeating Patterns

The recent burst we have seen is nothing new honestly.  I recall so many similar events that have happened over just the past 1 year alone, where the whole doom and gloom scenario rose up again and again and again.  So I decided to forget the hardcore technical analysis for once and just 'LOOK' at the graphs to see what my eyes tell me.  I looked for three recent moments when Bitcoin took a plunge and tried to see if there was anything of interest there. The patterns ended up being pretty interesting. Have a look

Period 1, the exchange Bitfinex faced a major hack where $78M of Bitcoins were stolen. I was using Bitfinex at the time and got a 33% hair cut of the Bitcoin I was trading there, as did all others. Painful, and on top of that the price of Bitcoin tumbled from around a $780 high all the way down to around a $550 low. That was around a 40% drop in that week alone.  Doom and Gloom, right? Not quite.

Period 2, Fast forward 4 months from the $550 low and we had just gone up 2.5x to an all time $1340 high for Bitcoin (circa Mt.Gox high of 2013). And then everything came crumbling back down to around $890.  Here we saw a 33% drop in price. Doom and Gloom, right? Not quite.

Period 3, 5 months after we saw an all time high of $3000! 3.3x growth from the previous all time low in Period 2. And, then it just dropped.... all the way down to around $2050 for its low.  And that was a 31.6% drop in price. Doom and Gloom, right?

LESSON 2: Zoom Out!

Notice the pattern here? Everytime a massive dip occurred, we just picked ourselves back up again and hit new highs. Also notice how when we Zoom out from Period 1, to Period 2, to Period 3, the previous dumps just seem almost insignificant by comparison to the subsequent Wave upward?  This is not to say that Bitcoin or any other crypto cannot come crashing down to $0 in a heartbeat, but based on past trends, what we're seeing here is VERY normal for the space. This level of volatility is what I've grown accustomed to and I don't sweat it because it's the norm.  

The key when you're long in this space, is to just let things happen the way they do. The Volatility can suck when you're on the losing end, but it can also feel euphoric when it's on your side. Managing expectations, and managing the emotions are key to investing in cryptocurrency because it is incredibly speculative. Never lose sight that today's downward trend is nothing new. We have all seen it before, multiple times beyond just the three period example shown above.

Beyond that, I have not invested anything into the space that I cannot live without. If I lose it all, well that will sting, but my livelihood will not be negatively impacted. And that's really the key in Crypto. Don't put investment in that could harm your livelihood if you lose it all. 

Please note: that I am not providing any form of investment advice. This is entirely a post about my personal observations and what I've personally taken away from them

Featured Image Source: http://www.maxkeiser.com/2017/06/projecting-the-price-of-bitcoin/