(Disclaimer: I am not a financial advisor, this is not financial advice, I don't work in the financial industry, and I am not officially licensed in any kind of financial capacity. This is one of my hobbies, and these are my own thoughts on the current state of BitCoin.)
With that out of the way, the first thing I want to talk about is that there's more to the markets than Technical Analysis (TA). Here on SteemIt, I think there is a large crowd that is very well educated on TA. I am not one of those people. I dabble in it. I have a good understanding of the rudimentary concepts involved. However, although it is a very useful tool in "normal" circumstances, I believe its' usefulness is limited by its' inability to take social and geo-political trends into account. For example, did you know that the new chairman of the Federal Reserve Bank just got away with telling a bald-face lie to Congress about the current state of the FED's assets?
In his testimony today, Jerome Powell, chairman of the FED, told Congress that the U.S. economy was "quite strong" and that the FED was "unloading it's balance sheet." So, what does that mean - "unloading the balance sheet?" It means that, in order to keep the U.S. economy & government open for business, the FED - who issues U.S. government bonds - has also been the main buyer of U.S. government bonds. This has been going on for several years now, and they make it sound better by calling it, "Quantitative Easing." Chairman Powell also told congress that the FED was, basically, "undoing" that fact by selling off their "assets" (U.S. bonds which they have accumulated). There are two huge problems with that scenario: the FEDs' own website demonstrates that the exact opposite is true - their balance sheet continues to increase - and there is no one else out there who is stupid enough to buy up U.S. bonds anywhere near the level that would keep the U.S. government running smoothly. I mean, would you invest your money in a 30-year bond for a 3% return rate, when a 10-year bond is also paying almost 3%??? This is what we call a "flattening yeild curve." I'm not going to explain that all right now but, if you don't know what that is - Google it. Bottom line: a flattening yeild curve is a major Red Flag that all is not well within your economic system. At the same time, the majority of the major news channels continue to indicate that everything is just fine - it's, "business as usual." As a result, many people are not paying it much attention - they are too busy working to earn a living.
Another thing that needs to be considered when trading and investing is the state of the world. Is everything pretty much calm and peaceful? Or is North Korea, or Iran, or some terrorist cell about to blow up a nuke somewhere? For that matter, is the U.S. about to do a "pre-emptive strike" anywhere in the world? Another major war could break out at any time. In fact, countries like America often start wars to distract people from the fact that the economy is in shambles. This scenario is fairly likely to happen again. And, every year that passes only increases that likelihood. War is not a good thing for anyone - except weapons manufacturers.
So, what about BitCoin? What about cryptocurrency? How does it fit into this larger picture? Some people say its' a "leading indicator" that takes a dive before the stock market crashes. Other people say its' a better long-term store of value than the U.S. Dollar. Personally, I think that the jury is still "out" on BitCoin/cryptos. No doubt that blockchain technology is going to transform the current economic instruments & currencies that are in existence today - but it's likely to be a wild and crazy ride. Five years from now, I think we're going to look back and be thinking things like, "Wow! That was unexpected!" or, "I sure didn't see that one coming." For all we know, BitCoin could be declared illegal by almost all world governments in a few years - because the central banks will be issuing their own blockchain currencies, and they will do anything and everything to maintain control over money. One thing is sure: if crypto enthusiasts think that the power to create and control money is going to shift away from the big banks and into the hands of "the people" without a major fight, they're wrong. More than likely, the big banks have already positioned themselves in cryptos in a big, big way - and their manipulations are going to continue. So, when it comes to BitCoin, while the shorter-term outlook seems positive, the long-term outcome is far from certain - and I think this is being reflected more and more in the daily price-action.
Please take a look at my notations on the following chart:
(chart courtesy of TradingView.com https://www.tradingview.com/symbols/BTCUSD/)
Legend:
Blue Line - support
Pink Line - resistance
Yellow Arrows - points of interest
The above chart is a 4 hour chart. While cryptos are notorious for being volatile, I am seeing a very orderly pattern of consolidation developing in the price action - especially now that the price is approaching the level of strong resistance. Typcially, a consolidation comes before a major move in the price, up or down. The good news is that there are strong levels of support in place at $9,400 and again, very strong price support at the $8,200 level. If the price does break downwards quickly, there should be a couple of stops in place along the way to get out. But, I tend to expect an upwards move after this consolidation, because it looks like the price wants to break upwards. That little stair-step pattern shows people waiting for more consolidation after each jump - people are being more cautious about it. Trading volume has been moderately low throughout the consolidation, which indicates people's cautiousness. Large moves upwards usually need to be accompanied with high volume in order to stick.
We recently had a quick dip in the larger stock markets. A lot of money came out - and it seemed to just sit on the sidelines, in the form of cash. It didn't really go anywhere. People were waiting for the "all clear" signal before cash moved back into the stock market. It's important to note that cash didn't move, in any significant way, into cryptocurrencies. In fact, cryptos took a massive dive a little before the stock market dipped. So - maybe it is a "leading indicator?" IDK. What if the stock market kept right on falling? Would more of the money have moved into cryptos? It's quite possible. The only commodity that showed a good uptick during that stock market dip was gold, which had about a 7% move upwards. The movement in gold was pretty small when compared to the amount of cash that left stocks - so it's safe to assume that people went to cash and sat on their cash for a bit, then it moved back into stocks. There is an interesting "dance" going on here with everything and, what I'm seeing is a lot of indecision. We could continue on this way for an extended period of time, due to the precarious situation with the bond rates. Watch the 10-year bond rates.
Right now, the 10-year is sitting at 2.904%. Personally, I did not think we could tolerate much more than a 2.8% rate - so my expectations have already been exceeded. But, slight upwards changes in that 10-year rate are going to keep on causing the markets to be jittery, prone to volatility, and "bumpy" as the FED tries to control the market with worn-out tools. Here's the real rub: what if the FED just decides one of these times NOT to prop up the market? Like, maybe right now, when the media is telling everyone that everything is fine, nothing to see here, move along? The FED could also "lose control" of the situation and fail in their efforts to keep the market going. This is how it will happen, one day. And, "one day" is getting closer every day.
Currently, I have a pretty large position in BitCoin - so I'm watching it like a hawk. Trade carefully!
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