Bitcoin update

Bitcoin has been strong and I think a pullback is imminent (within days or weeks). The risk is higher. In my previous post I examined the possibility of a double pump the next year. We are still in the first phase of a crypto bull market IMO.

I also recently revised my Bitcoin price targets. I writing this post as I feel I need to revise them again to find ways to decrease risk. 30% of my total public portfolio is in Bitcoin certificates. I’m overexposed to crypto. I need to write down my thoughts and try to clear my mind.

The pullbacks has been more frequent lately and shorter and shorter. The last one on Thursday was for 10% lasting only hours which could suggest that a top forming is coming closer or a sideway move.

Lots of scenarios are possible. Nobody can really know when the top is in. That being said I think there will be a time where the price is overpriced and a time where real euphoria sets in. I don’t think we are there yet.

I’ve done some research to find signs if a top is near or not. I’ve looked at a few videos of Technical Analysis and tried to look for tradable patterns.

I’m not a pro. I’m an amateur trader and newbie chartist. By trading and charting more often I believe I will learn more and perhaps faster than just holding. In a crypto bull market it seem like it is better to just hold and try selling the top for maximum gains.

I will try to do something in between holding and some shorter term swing trades. Both Ethereum and Litecoin have better risk/reward so I will probably increase those. I will look to the MVRV-Z-Score more often as well as Google trends for topping signs.

LookIntoBitcoin | MVRV Z-Score

My interpretation is that we are not at a long term top yet but it could get there soon
Bearish case

My screenshot of Google Trends:

Previous tops had more interest over time than at the previous ATH.

My take

Explosive tops can be come fast and die quickly. It will be hard to sell and get out in time (days – week), especially since I can only sell during Swedish office hours (I have Bitcoin certificates). Therefore I will have to aim to sell before, during and after. With my changed expectation of 2 tops this year I have to change my plan as well. There is also the possibility that the cycle will be shorter making this a 3 year top, followed by a longer bear market. The 4 year cycle theory and the prolonging cycle theory might not be in play. Retail investors who experienced the 2017 bull learned that profit needs to be taken and might take profit to early (myself included)

The risk/reward for Ethereum and Litecoin is far better than Bitcoins and I will consider changing it up a bit.

It’s still early in the cycle with the halving less than a year ago.

Until proven wrong (price action) I will go with the double top scenario.

Worst case scenario
A crash to previous ATH (~20k), weak bounce followed by continued breakdown. A larger bounce would indicate continued strength. 80% draw down from 40k is 8k. Basically it would mean I would give back all my gains. Altcoins will also break down. One of my 2021 goals is to protect my capital and therefore I will be more aggressive with my stops.

Charts (open image in new windows for larger views)

The big picture. Blue bars are bar patterns from 2013. 2 tops in 2013 resulted in ~80% corrections. The same as in 2017. Will it happen again?
Shorter time frame. Dotted lines are Fibonacci levels and possible support/resistance points.

My plan

I’ll try to stick with about the same plan as per my previous post for my long term holds but with tighter stops to protect capital. Targets remain the same but I’ll try to be more aggressive selling. I’ll look for high MVRV-Z score, Google trends and if the price comes near the upper trend line (please see image above) to try to spot a top.

I am considering selling up to all of my Bitcoin certificates if the stops hit, especially if I think the double pump scenario plays out. I will also start to try to swing trade with some of my holds and perhaps switch over to Ethereum and Litecoin.

My stops will be moved up as the price moves up. The purple line will act as support. I will sell much, if the price breaks it since it’s a long way down to the previous all time high as well as the green line. These lines are not exact and can easily be redrawn to fit my view. I’ll use them as guidelines only.

To the purple line it’s about 10 days away if the price goes sideways. If the price goes straight down it will land at 30k. For the price to continue go up it would be good if there is some movement sideways or down to the purple line.

If I buy back I will look to buy Bitcoin Certificates from different companies. At the moment I have Bitcoin XBT and Tracker Bitcoin. There is also the same but in EUR instead of SEK. Others are Bitcoin Zero and BTCE (BTCetc Bitcoin Exchange Traded Crypto) which I could buy to decrease risk.

Summary

  • Aggressive selling (preferably several partial positons at different times and levels) if there is sign weakness or topping.
  • Sell if uncertain and buy back if strong price movement proves thesis wrong (new ATH).
  • Look for other entries in other assets with better risk/reward
  • Wait and be patient.

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