Since leaving my job as a corporate design manager to analyze and trade cryptos (among other things), I’ve gained new attention from old colleagues. In circles of my former profession, I’m the guy that retired to trade for a living. While my departure from corporate life was something I planned for many years, cryptos certainly gave those plans a shot in the arm.
Regardless of how it came about, my early ‘retirement’ carries some lore; ‘He must have made millions on Bitcoin’ I’m sure some say.
The truth is that I have never owned more than two Bitcoin in one trade position. Regardless, now, if someone is curious about cryptos, I’m the guy they need to talk to. I hope I never lose this lure. Not because I care about being a storied individual, but this front line position on sentiment helps me make money.
When we were near our top at $19,000 I received many free lunches. The ‘crypto-curious’ took me out and wanted to know if it was time to kick their FOMO (fear of missing out) into full gear and start investing. Fortunately, they had me, and I warned it was not the time. I had previously called for a top in the $14,000 region but Bitcoin zoomed straight through. At $19,000 I knew we were just that much more extended, and that finally did the trick. Price reacted to a fibonacci level I had projected as the next key level: $18-19K.
So my friends received a loud and clear statement that that was not the time, but what if I hadn’t been there? Would they have suffered 70% decline in their investments?
Some other old friends were not so lucky, not having heard my story. I heard that an old coworker bought Ripple very near the top of $3.29 before it declined to 42 cents. That’s one example of what happens to friends that don’t check in.
Am I getting any more free lunches? A beer at happy hour? A coffee? Of course not. No one wants to talk cryptos, at least not yet. For those that haven’t been in cryptos as long as I have, the nearly 70% decline is something special and uniquely wicked. Why would anyone what to own such a thing? So, my food expenditures have increased recently.
But I know these declines are normal and should be expected as a crypto trader. In fact the 60% decline in Bitcoin from peak to trough is quite shallow. It is a very shallow wave iv in my wave v of primary three, that should top between $65,000 and $225,000; that is, unless $3,000 doesn’t hold. If you take a step back with this knowledge, you can see this is great reward for the risk. But no one cares. The FOMO gave way to fear.
But I guarantee you, if my preferred path higher works out, FOMO will begin to kick in with a breakout above $20K and the chase will become full grown at $65,000 and above.
As soon as we topped I identified that $4700 is an ideal point for Bitcoin to find a final resting spot. However, Bitcoin is often very shallow in wave 4’s, so $8875 could provide support. We came right in between, at $5960.
Long term chart of Bitcoin showing key support and resistance levels.
Charts created in Motivewave
If you now find yourself among the crypto-curious, particularly after my article last week discussing the potential bottom being in , don’t delay. If you do, your risk increases. While some traders are ‘breakout traders,’ preferring to see momentum, I am a retrace trader. I much prefer to buy during retraces, as close to stops as possible, so my risk decreases and my reward increases.
Right now, the long-term stop is $3000. But for swing traders who prefer to keep it tighter, we now have a 5 wave move off the April low. This means we now have a support at the .764 retrace at $7160. That level is an early warning that $3000-4700 may be in play.
Short term chart of Bitcoin showing key support level.
Charts created in Motivewave
You can wait, and potentially get caught in a false breakout. Or, worse, you can buy when FOMO is full-grown amongst the masses, bringing a major top.
But you might consider simply managing risk. I’ve listed the parameters of the trade, all determined by Elliott Wave analysis. We may be looking at $65,000 and above as a potential top. And we’ll start to see other key pivots as the wave patterns develop. As of writing, Bitcoin is at $8400, and the stops are $7160 and then $3000. As a trader, you can simply take these parameters, or trade skew if you like, and position accordingly. Leave some ammo for lower prices, and never ‘bet’ more than your emotions or finances can handle if you’ll stop out.
If you do this repeatedly, you can profit in crypto trading. But you have to avoid the emotions of fear and FOMO, which are not helpful in trading. Knowing where the pivots lie in the market and designing a trade to fit your needs and profile will over time yield a consistent profit.