[0248] Bitcoin: 'Technical Analysis' vs 'Psychological Assessment' of the Market
Right now, among YouTubers & commentators in the crypto space, there's talk of a bull run. Technical analysis charting is out in force. 'Lines & triangles' are madly being drawn on screens around the world to reflect both up trends and a down trends at the same time. And like usual, nobody really knows what the hell is going on and is resorting to intellectual-sounding methods to hide their confusion.
The market is poised to do... something.
The thing I marvel at is that TA is usually completely disconnected from human psychology. It's divorced like it's a completely different language. As though human beings don't think or emote when they trade! Analysts rarely, if ever, throw in a gut instinct ( or common sense ) to back up ( or, hold up ) their lines and triangles.
Math, past trends, descending triangles, cup and handle patterns, Bart Simpson analogies are used to replace what people actually think & feel right now.
As a secondary layer, to confirm your psychological profiling of the market, TA works wonders. As a primary layer, what is it backed by? Math? Past market performance... which is really what people thought last time the market was in the same place? Intellectual guesstimates that you can sell to subscribers?
Quit the nonsense and back your TA with emotional cycles & logical progressions of thought! Every human being comes equipped with the ability to understand them! We come with the most sophisticated facial & body recognition software that leaves the NSA to shame. So use it when charting!
When you buy or sell a coin, you think something, right? The price charts you loom at all day, every day are nothing more than the collective thinking about the markets. Additionally, price charts are not only a historical representation of what people thought at a given time. They also shows how they acted based on what they thought and felt.
To me, the price charts are a thought pattern. A blip of human psychology rising in enthusiasm and dipping with fear.
But psychology is just not trendy or seemingly applicable in the crypto space. Rather, it sounds a hell of a lot more intellectual if you draw copious lines and moveable-triangles on a chart instead of confessing that you're guessing and just don't know what will happen next.
Peeps, technical analysis without psychology as your basis, is just lines and triangles!
Markets are about the actions people take. Price charts are a depiction of a brainwave. So how the hell did we arrive at the idea that none of that correlates to the price charts when predicting probabilities?
You don't have to be a PhD to figure out the market is weak, egos are bruised and people are impatient to escape the bear market. All of this will manifest in the market at some stage. It has too. Reality always trumps fantasy. Just look at what happened at the end of the last bull run and hype cycle if you don't believe me.
The Psychology of the Current Market
In my mind, there is a high chance that the crypto market is in for a 'step down' which would mean we are currently experiencing a 'slow bull trap'. Sure, money can be made from alts popping off but the risk on your trades is high compared to if this were a bull run. So, sure, you can get in and get out and that's a good play.
But on the macro side of things, the market is poised to step lower rather than move higher. To me, the market feels 'weighed down', top heavy rather than buoyant, exuberant and enthusiastic.
I think you would agree and it didn't take you haveing a PhD in behavioural psychology did it?
One chart I like to reference is the emotional cycles of trading chart that has been rehashed a million times but none of the fundamental principles are fully understood. The sequence and fixed progression of the chart gives you a solid framework and macro picture of what to expect.
Right now, we are between despair and hope. Again it doesn't take a doctorate in psychology to see that's about right. So what does that mean? It means that those 'archetypes' will be playing out right now, coloring peoples perceptions of the market. And therefore, shaping their actions.
Simply put, those emotional patterns distort (a) where people think the market is at vs (b) where the market is actually at. People are desperate to leave the bear market and hope that it will come soon.
Which is pretty accurate statement because the hope in the market at the moment is really "desperation for gains" made by a bunch of amateur retail speculators wanting the market to be in a bull run when it is not. Blunt but accurate, no?
The mistake speculators are making right now is that they want to skip to weeks of parabolic moonshots when in fact, a bull run takes time to gather steam to shoot to those highs.
A bull run is coming, but not yet. So a far better play is to let the market be what it is and gear your bets accordingly. Sage advice that is often ignored.
We want the market to be green but hope is not what drives strong confidence. Or an inflow of strong and steady capital, day by day, week after week.
In fact, the reverse is true.
Given that many retail investors are up to their eyeballs in credit card, student loan, auto loan and / or mortgage debt, the chance of false confidence right now is high. Couple this with recent reports of 90% fake trading volume on CoinMarketCap ( an allegation to which their developers felt the need to respond to ) and you have even higher risk of a steep decline in price to the double bottom many of the more seasoned, objective analysts predict.
Yeah, I want my bright red Tesla Roadster too but am savvy enough to know my wanting the market to be strong and support my, yours and everyone else's grandiose plans is just not the current reality. That kind of market is at least a year or two away.
This doesn't mean that the price of Bitcoin will drop. But, in my mind, the risk is too extreme to simply wade into the market based on what I perceive as opposite trading signals. I.e. The opposite of reality.
This is the downside of hope. On the positive side, we have seem a glimmer of a bull market. On the negative side, something you do have to watch for when trading, hope is a projection. It's a desire for things to come. Hope is not about the current reality. It's a 'later' thing that we wnat right now. It's the oasis in the desert that turns out to be a mirage.
Right now, despair has driven the market to become drunk on hopium. Something to be aware of when setting up your trades.
To be fair and not be viewed as a FUDster, enter trades but just be aware. On the macro side, we are headed for a bull run but first I can see a decline in the price, perhaps a sharp one given the fickle enthusiasm and bruising from a long bear market. A sharp sell off is quite logical as hopium is brought back to reality so something stable can be built.
Mark my words, if there is a decline, every man and his dog will Tether / stablecoin their precious and hard-fought gains over the last 3 months. Thus causing a spiral downwards.
Not out of the question and I think April is when we will see that. Perhaps several cascading events to the bottom of the market and the acknowledgement that we - and the market - are depressed. That acknolwedge is when things click into place and a new chapter, a new 'emotional cycle' is born.
From what I know about human emotion is that we don't get to skip any of them. Nor does the market which is a collective of human beings and their emotions.
April looks like being a decline and so frankly does May, trickle-sliding down into June. In my mind, somewhere around June or July is when we see a double ( or triple ) bottom, perhaps even slightly lower than the previous lows. Then August we arrive in Hope-town. And the uptrend everyone is thirsting for.
Thanks for watching,
Brendan Rohan - Indie developer of 'next gen' natural medicine from Melbourne, Australia
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