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I believe a potential life-changing opportunity may be approaching for Bitcoin and other cryptocurrencies but for now we’ll keep it to Bitcoin. If it plays out the way I think it will, Bitcoin will hit new annual lows in early 2019 and it will be off to the races. I will do my best to explain what is happening here.
Bitcoin ended 2017 with the completion of a near 3 year bull market and parabolic advance (also known as a “Bubble”). As with any new and immature technology that is not really understood by the masses, this was not the first bubble for Bitcoin nor do I expect it to be the last. If you follow the space then you know that the owner of the NYSE (ICE group) is opening a cryptocurrency trading exchange (Bakkt) starting in January, CBOE & CME already have paper futures trading, Nasdaq, Fidelity, Northern Trust, Morgan Stanley, Goldman Sachs are invested, Yale Endowment Fund, are just some of the big names who have moved into the space. I literally can not name them all. The space is going nowhere. Does that mean Bitcoin can’t hit triple digits? Absolutely not. Do I believe it will? No, I do not.
2018 has been a year of full retracement for Bitcoin from all-time-highs in Dec 2017 of almost $20k, to today of about $3,200 per Bitcoin. Earlier this summer, when Bitcoin was trading at around $8k, to my followers and fellow investors, I called for and predicted Bitcoin would fall to $3k. These are estimates of course, but here is the chart for that:
As of this writing, I do not have enough information to say that an interim bottom is in yet. Although roughly $3k was my initial target, $3,200 could be it. Bitcoin and Ethereum leveraged shorts are currently at all-time highs and, as you may know, human investor emotion almost always repeats — people buy the tops (Euphoria) and sell the bottoms (Panic/ Despair). The financial elites and “whale” traders control the short-term direction of Bitcoin, so with shorts this high this may be the bottom for now (preparing for a massive short squeeze).
This chart explains the Bitcoin bubble leading up to end of 2014 and into early Jan 2015, when the final capitulation happened. It also forecasts my expectation for the next 4 weeks, into early 2019.
My expectation is a similar scenario is about to play out in late Dec and early 2019. Most have said that Bitcoin/Crypto has already capitulated. I do not believe it has. Capitulation & Despair are the technical terms for the official end to a bubble.
In Jan 2015, Bitcoin bottomed out at $150 per Bitcoin. I believe the same thing will happen early next year, but this bottom will be roughly $2k. The reasoning for this is complex but the theory for around January is a capital gains tax delay play (same scenario plays out in equities often). The advance from Jan 2015 to Dec 2017 (almost 3 years), took Bitcoin from $150 to ~$20k — a 13,000% increase roughly - this was driven by early-adopter & speculative Retail "fear of missing out" (aka FOMO). I expect the same scenario to take place again, although this bubble will take a little longer to form (3–5 years) and will be driven by Institutional "FOMO." That said, macro-economic factors (such as a prolonged equities bear market or global recession/ depression) could change things. In fact, I’d say that’s very likely based on the S&P chart.
My expectation these next few weeks of December is for the elites to send Bitcoin up to prior resistance of ~$6k. I then think they will push it beyond $6k to get people bullish, get new retail $ into the space, and get leveraged-longs on board. You will hear news stories like “Bitcoin is back!! Buy now before it’s too late!!” And then in January they will tank the price, squeezing the leveraged longs. This will ruin countless amounts of investors/ speculators, and even the most ardent cryptocurrency believers who have held on all this time will sell on this drop (at or near the bottom). This will be the final capitulation the space needs to begin the return to mean and eventual recovery. It will also be the perfect time for elites to take profits, short Bitcoin, delay capital gains tax payments until Apr 2020, and accumulate the majority of it at the cheapest prices possible.
As of today (11 Dec 2018), this is how I see it playing out. This could change but I will know for sure in about 2–3 weeks. Trying to catch this bottom is a very high risk play as macro-economic conditions could change things, but I believe the potential reward may be worth it.
Once again, this is only my opinion and should not be considered financial advise.