Momentum has a decisive influence on results. During the bear market, I realized the consequences of this effect. I still place emphasis on fundamental analysis. In the long run, the income generated by the asset determines the price. The return on investment largely depends on the timing of the purchase and sale. Considering the momentum, buying, and selling following the market frequency brings success.
Momentum leads us to see the ordinary as beautiful and mediocre as excellent. In the absence of momentum, flaws become apparent. When love ends, we begin to think that the object of desire is not so attractive. Unlike love, momentum repeats periodically. The seasons follow the seasons, and spring comes again.
There is no upside momentum in the crypto market these days. Those who act by the motto Trend Is Your Friend stay away from the market. Only hardcore Hivers left around here. If you are reading this article, you are one of those.
The momentum affects prices in intertwined waves. The primary trend is the most influential. Some waves are effective on the basis of weeks and days. The primary direction of crypto changes every two years. Bitcoin rises for two years, falls for one year, and remains flat for one year. Altcoins are rising for two years and falling for two years. Altcoins' momentum is getting more robust compared to Bitcoin.
The accumulation of power creates a potential. The greater the accumulation, the greater the probability that the potential will become momentum. The RSI on the weekly chart shows the momentum best.
At the bottom of the chart above, we see the course of the RSI for Bitcoin. For Bitcoin, the 2020-2021 bull market started in April 2020 when the weekly RSI rose above 50. The mini Bitcoin rally started again in January when the weekly RSI rose above 50. Last week, the RSI fell below 50.
It is doubtful that risk assets will rise as the water in the pool decreases. FED reduces liquidity in the market. Although some central banks provide liquidity to the market, we know there is not an abundance of money similar to 2021.
Can momentum be created in such an environment? As economic data changes, expectations for liquidity are also updated. In addition, technological development is causing crypto networks to accumulate power. Data processing costs are decreasing year after year. Thus, blockchains become feasible for a more significant number of tasks.
Is it the right time to buy? Or do you have to wait for the cheaper prices? I recommend gradual buying to those who consult me because whales love to surprise.
I said that intertwined waves create momentum. Although the primary wave is in the descent phase, the secondary wave indicates power accumulation. The daily RSI is still in the oversold zone.
The chart below shows the relationship between the Fed's monetary base and the total market cap of crypto. The blue line shows Fed money. The orange line is the total market cap of the crypto. The similarity of the graphics is striking.
TL;DR
Momentum affects prices the most. Because most investors act according to the Trend Is Your Friend motto. There are many indicators we can use to measure momentum. The 200-day average is an important indicator, for example. On the other hand, the weekly RSI better reflects the primary trend better.
Momentum-based investment in digital assets with the potential to generate income would be an ideal choice. Altcoin prices have reached levels suitable for buying, but there has yet to be momentum. For this reason, I recommend gradual buying.
Noticing momentum formation in the early period and acting fast allows us to get more share from the rise. Investors new to the market buy late when the momentum starts to lose strength.
We are currently experiencing the prolonged winter of crypto. Those who are not cautious can get extremely cold in March. On the other hand, we know that spring is ahead of us. When the momentum starts to build, we will have two whole years ahead of us in which new stories will be written.
Thank you for reading.
Cover Image: Midjourney App