You have probably seen and read this question all over the internet as it gets asked a lot from traders and potential new investors. Usually, when the market is in an uptrend, you are most likely bumped into the bubbly questions:
These questions tend to fade once the market decides to turn south. I don’t think I have to mention this again, as you have most probably read it 100 times over the internet – but Bitcoin price has lost over 80% of its value in 2018. Sucks right? Not really, I’ll tell you why in a second.
In any market, whether you are trading bitcoin, ripple, stocks or any other financial instrument, you will need to understand one important thing – markets move in cycles.
Bitcoin & 2008 Housing Bubble
Do you remember what happened when the housing bubble burst in 2008? Banks, insurance companies and many other sectors were strongly impacted. Even the 4th largest investment bank in the United States known as the Lehman Brothers filed for bankruptcy after a mounting debt of over $600 billion.
But some companies survived this crisis. Actually, many of them did. Apple stock, for example, lost about 60% of its share value between May 2008 and January 2009. Apple price eventually recovered and rose over 150% one one year after its yearly low of $11 in 2009.
Therefore if we compare what happened back in 2008 and to the current state of the crypto market, we can fairly say that there are many altcoins which many investors and traders call them “shit coins” will end up like Lehman Brothers. However, sustainable projects that actually have something to offer and a solution to solve will survive this market correction – exactly how Apple did.
Bitcoin’s Market Cycle
So what are market cycles and how are they relative to Bitcoin. As I have mentioned above any financial instrument moves in cycles.
Richard Wyckoff who was a legendary trader in the 20th century defined key elements in trend development in four phases. The market phases are accumulation, markup, distribution, and markdown.
Wyckoff established a powerful rule when it comes to trend recognition. He concluded that there were just three types of trends: up, down and flat.
Below is an example of Bitcoin’s monthly chart illustrating all the stages. As shown, Bitcoin is currently in the fourth stage which is defined as the markdown stage. Prices are making lower lowers, and the sellers are still in control of the market.
So does this mean Bitcoin will continue to fall in 2019? Not necessarily. What we need to look for are reversal signs. We know now that before a trend starts, an accumulation phase has to appear – so this would be our first sign. Accumulation could be spotted when prices don’t make any big advancement and tend to move sideways.
Below is an example of an accumulation phase, back in 2015, when Bitcoin was trading between $200 and $300 for almost one year.
Prices never traded back in those levels ever again. After prices broke out the accumulation phase, Bitcoin skyrocketed to $1280 in early 2017. That’s over 1000% in one year!
Please note that it’s not always easy to spot an accumulation phase. You will need to keep a close eye of price action and read markets on different timeframes. Another indication for a trend reversal is when prices actually make higher highs and higher lows.
If you are a new trader and don’t have any technical background, I strongly recommend reading “Technical Analysis Using Multiple Timeframes” by Brian Shanon. It’s a great guide that will allow you to understand market structure and psychology of price movement in the most simplest manner.
Conclusion: Will bitcoin price rise?
To conclude and answer the headline question, Bitcoin price will continue to fall as long as it does not show us major reversal mentioned above. I hope that my explanation was clear and simple enough to understand. Please do not get dragged with technical analysts who will give you a specific date on bitcoin reversal, because no one can predict that.
I’m currently keeping a close eye on Bitcoin’s price action. I do hold some altcoins but planning to purchase more once I see the market is committed to making the reversal that many of us are waiting for. For all those who are doubting bitcoin’s potential – the digital currency is here to stay.
For now, happy new year :)!