Is the Bottom In?

by JDH on June 25, 2022

Perhaps the bottom is in.  But probably not.

S&P 500

Does this chart look like the markets have reached a bottom?

No, it does not.  Enough said.

Bitcoin

The 5 year chart of Bitcoin is very informative.

As we discussed last week, for the first time ever, in the current cycle Bitcoin dropped below the peak of the previous cycle.  Since that has never happened before, “all bets are off”.

For a more “zoomed in” perspective, here is the six month chart:

The $20,000 level (the second from the bottom blue horizontal line) is the previous cycle top, which was broken, but now appears to be acting as resistance.  Will it hold?

My gut feel is no, it won’t, and Bitcoin is likely to “spike down” to $12,000, or perhaps $10,000, in the final blowout capitulation.  That will be the time to go “all in.”

Or not, who knows, you decide.

Let’s see how Q2 ends.  We’ll discuss it next week.

For the first time in Bitcoin’s history, the bottom of the cycle has crashed through the prior cycle all-time high.

The last cycle peaked at just under $20,000 in December, 2017.  Bitcoin then collapsed to around $3,000 at the end of 2019, and then started an amazing bull run, taking it to almost $70,000 in November, 2020.  Since then, Bitcoin is down 73%.  As I write this at 5:45 am on Saturday June 18, Bitcoin is trading at around $19,000.

One could argue that this is a “wick down”, and we’ll need to see a weekly close to confirm this, but the same can be said for the peak in 2018; it was a “wick up.”  One could argue that the close for the week in 2018 was just under $17,000, so perhaps on a weekly basis Bitcoin has not collapsed through the previous cycle top, but it’s very close.  Here’s the chart:

The bottom horizontal line is the prior weekly top (around $17,000 in 2018), and the all-time cycle top intra-week is the second from the bottom line at just under $20,000.

It ain’t pretty, folks.

There are two obvious “end games” here.

First, Bitcoin is dead, it’s going to zero, it’s done.  I doubt it, but it could happen.

The other alternative is that it finds a bottom, and then it recovers, as it has done in every previous cycle.

In the last cycle, Bitcoin dropped 84% in 52 weeks.

As of today, Bitcoin is down 73% in 31 weeks.  If Bitcoin is to drop 84% this time also, Bitcoin could see $12,000, or perhaps $10,000 on a “wick down.”

I have no idea what will happen, but my guess is that Bitcoin is not dead.

Bitcoin is crashing, because everything is crashing.  The stock market is down around 25% from the peak, so Bitcoin’s crash, given its greater volatility, is not surprising.  It is what it is.

If you are in cash now (and I have a significant cash position) great.  Hold on to it.  The time to buy is likely approaching faster than most people expect.  Not today, but by the end of the summer, probably.

If you hold Bitcoin, sorry.  You could sell now and buy back at lower levels, but given that most of the drop has already occurred, it’s probably best to simply ride it out.

If you hold altcoins, good luck, most of them will go to zero.  I have none.

That’s the update.  Fun times.  More next week.

 

Bitcoin: How Low Can It Go?

June 11, 2022

As I write this at 5:35 am on Saturday, June 11, Bitcoin is trading at around $29,000 USD.  This is not good for the Bitcoin bulls. As the chart indicates, $29,432 is a significant support/resistance level, as that level represents the approximate double bottom Bitcoin hit last summer.  It is now “this summer”, and Bitcoin […]

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Bitcoin: The Wasted Year

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As I write this on Saturday morning, June 4, 2022, Bitcoin is trading at around $30,000 USD, which is where it was a year ago. Just under $30,000 appears to be a significant support/resistance level, so the strategy, for now, is relatively simple: Buy Bitcoin at under $30,000, and sell starting at $33,000, and just […]

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Nothing to report, again

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Sell in May and stay away. See you in June.

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Still Nothing to Report

May 21, 2022

The DXY is still strong.  The markets, including gold and bitcoin are weak. It’s “sell in May and go away” time. Let’s talk again in a week.  Or a month. I’m on the sidelines for now. That’s it. Short and sweet.

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Nothing to Report

May 14, 2022

The weather is gorgeous here in Southern Ontario, for the first time in forever, so you should not be wasting time reading my musings. Nothing has changed. The market is in turmoil. Now does not appear to be the time to deploy capital. Raise cash.  Stay on the sidelines. We’ll wait and see how it […]

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Bitcoin: Next Stop $30,000?

May 7, 2022

The Bitcoin chart is not pretty.  (It looks like the stock market chart): In the bottom left corner, in the red circle, is the “crash” of March 2020.  Seems like a distant memory now, but it was a drop of over 60% in a month.  Bitcoin recovered, and from the March 2020 low of around […]

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Sell in May And Go Away, Again?

April 30, 2022

Historically, the month of May ain’t great.  Over the last 60 years, half of Mays were “downers” as measured by the DOW.  June and July tend not to be great, but that sets the market up for the end-of-summer rally, and better times in the Fall. Two caveats: First, during the bull market from 2017 […]

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The DXY

April 23, 2022

I don’t typically comment on the US Dollar, but today I present this simple chart of the DXY, going back to 1998: The Dixie, as the DXY is known, is on the verge of either a triple top, or a significant breakout.  Since the start of the millennium, the DXY has been in a downtrend, […]

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