When asset instruments crash, they go down in stages. Stages are price ranges when the asset stops and maintains a level of stability before they reprice again to another level. Many markets do this on the way up as well as down. Once a market has stabilized, the next break away from that range is highly likely to produce a sizeable move. For a trader this offers a market neutral signal that can be jumped on, long or short.
It is not a new phenomenon or rocket science. Markets are consensus-seeking devices in the short term and that consensus is revealed in charts and gives a clear view of the past. The less efficient and perfect a market is, the more charts give a hint of the future and in my mind crypto is a very immature market filled with inefficiencies and imperfections. As such, charts of price action in bitcoin and other coins and tokens are a good tool in the alchemy of guessing what is going to unfold in this exciting and dangerous market.
So bitcoin looks to be breaking south for the next leg down. Forgive me for making such brave unhedged calls; I can’t be right all the time but as far as I’m concerned it’s highly likely we are about to drop quickly towards my $2,500 target.
Here is the chart as I write:
It is a high probability that this harmless-looking spike down is the start of another drop.
You can see volatility has exploded at the current level, a sign of increased uncertainty and a generally bearish state, but you can also see today’s action suggesting a drop out of this recent trend. If this fall continues then we are off towards the final capitulation.
When will we know we are at the final bottom? When everyone is screaming ‘the end of bitcoin’ and then after an extended period of basing.
This means we can wait and see. The end of this crash will look awful, the ends of crashes always do. That is yet to come but the next leg could be here.