Accumulation Zone

In my last post I discussed the psychology of the market cycle. I put forth the argument that we are in the final “depression” stage of the market cycle, which is the best accumulation zone for setting up long positions. Bitcoin has been trading in a parallel channel between $5,750 and $6,800 since June 10th. The volume is still slowly declining, and the RSI has moved up overall since we entered the channel, which is a bearish divergence. It appears that we could retest the lower support of $5,750 once again in the near future, but the daily RSI is already moving towards the oversold territory, so the support will more than likely hold for now.

As always, there are two different paths this could take; and your odds of predicting the next market movement are no better than calling a coin toss. It's always 50/50. Bitcoin could make a new lower low for the year, or it could start moving up again out of the parallel channel. I would argue that the longer we remain in the parallel channel, trading above the lower support, the greater the probability that the market will start to move up again. The trade volume has declined to the extent that a capitulation like we had back in February seems unlikely at this point. If the market continues the downtrend, I believe it will be a slow and painful grind.

I see a lot of analysts calling for $5,000 and lower prices for Bitcoin as the final low for the year. All I can say about that is technical analysis isn’t capable of producing accurate predictions in that regard. What’s going to determine the final low is the level of fear and greed in the overall market sentiment, and that changes all the time. Right now there is still plenty of fear, and that’s why the volume is still declining, so perhaps their bearish predictions will be proven true. But so far that fear has been outmatched by the greed of the aggressive traders who have swooped in and sent the price rocketing back up every time it’s fallen below $6,000. When I argued that I see more greed than fear in the market right now, I wasn’t talking about the overall market sentiment, which is still very fearful, but rather the emboldened greed of the traders who have consistently held the price above $6,000 this year.

The crypto market is telling a compelling story right now. Yes, there’s been a deep and prolonged correction, but so far nothing about that correction has been out of the ordinary, or a cause for concern. In fact, it has been a very healthy move for the market as a whole. The price has been moving down all year, but we've had several mini bull rallies on the way down, and there's been plenty of big opportunity for traders to capitalize on. Now we are in the final stage of the market cycle, and the point of greatest financial opportunity. But in order to take advantage of these lows, you have to first overcome the fear of the price moving even lower after you enter the market. You can always use a stop loss, but then you have to accept a small loss if you get stopped out. No matter what, there is no such thing as a "risk-free" trade. And you will never have any real certainty about future price movements. The best that any trader can do is to buy low and sell high. And that's why I think this is a great time to buy, no matter what happens next. As long as you follow your strategy, and keep your emotions under control, you'll be successful.

NOTE: This is not investment advice. Everything written here is for entertainment and educational purposes only. Always do your own research before you invest, and never invest more than you can afford to lose.