There are as many ways to analyze a market as there are participants in markets. However there are some constants, namely people. Market psychology, or how price action reacts to market conditions tend to broadly follow patterns.
Everyone who invests or trades has seen the chart showing the big run-up, massive selloff, bounce of hope and subsequent selloff that just spends the next few years making a fool of everyone.
It isn't too far from the truth, pretty accurate actually.
The question is, where are we in the cycle?
As crypto investor/traders we are constantly in fear that the market just topped or we fear that BTC is going to 100k and if we sell now we are going to miss on the once in a generation (lifetime?) shift of wealth.
A tool that I use to help me figure that out is called an "Analog". In essence it is finding a time in history that is charted and matches to the current market.
The internet/dot com bubble of 1999/2000 is pretty similar to the crypto market of today.
One of the high flyers that really grew massively and had a massive selloff then re-emerged to kick everyone's ass is Amazon.
Amazon IPO'd at about $2 and moved up to a top tick of $113 before falling off a cliff over about a 3 year period. An amazing level of growth by any measure, but quite analogous to cryptocurrency markets at the moment.
To be fair I also charted the Nasdaq, Juniper Networks, Brocade, Broadcom, Ebay and many of them had the same pattern. But Amazon the correlation between AMZN and ETHUSD is my favorite currently.
Since the summer of 2017, when crypto had a massive bloodbath, ETHUSD being a very big player rising from $7 to nearly $400 and dropping back down to $165. The Amazon analog allowed me to trade ETHUSD near perfectly. I layed the ETHUSD chart over a chart of Amazon from 1997-2001.
Once the bottom was put in on ETHUSD I was expecting a move up to 265, back down to 200, up to 225, back down to 185 and then on up to the 300 level where it would hang out for a while.
There would be a long consolidation period around the 300 dollar price level then would break out of the wedge pattern and explode higher rapidly.
All of that happened!
The prices are not the same but the patterns are.
So that gets us to where we are today more or less. Analogs certainly aren't exact.
Now the bigger question we have is where we are going.
After AMZN topped out at $25, dipped and traded the same pattern ETHUSD formed as I explained above.
Then from $25 AMZN it doubled to about $54 then pulled back and consolidated a little bit.
ETHUSD currently sits at about double the $400 top at above $850 pulling back and is consolidating a little bit.
From there AMZN exploded over $100 before pulling back, that's a 4x move from the first wave high.
If we are still correlating with AMZN - ETHUSD that should mean approximately $1600 for ETHUSD before we have a major correction.
The correction would be about 50% to 61.8% from the lows in ETHUSD to the Highs so from $7-$1600, let's just ballpark that at about $800 which is where we are currently trading more or less (this $800 will probably have a lot of historical value in the future).
From there we consolidate and hang out for a few months before taking off like a rocket, again, to closer to $2,000 then another pullback to that $800 level, again, and we hang out even longer there the next time before rocketing up to even newer highs.
That will bring the dreaded, painful, drawn out, ugly bear market. It would last much longer than you'd expect, while sitting at the half way point of a bull market.
Disclaimer: This analysis is circulated for informational and educational purposes only. There is no consideration given to the specific investment needs, objectives or tolerances of any of the recipients. Additionally, actual investment positions may, and often will, vary from its conclusions discussed herein based on any number of factors, such as investment restrictions, portfolio rebalancing and transactions costs, among others. Recipients should consult their own advisors, including tax advisors, before making any investment decision. This report is not an offer to sell or the solicitation of an offer to buy the securities or other instruments mentioned. The research utilizes data and information from public, private and internal sources, including data from actual trades. While we consider information from external sources to be reliable, we do not assume responsibility for its accuracy. The views expressed herein are solely those of the author as of the date of this report and are subject to change without notice. The author may have a significant financial interest in one or more of the positions and/or securities or derivatives discussed.
