Bitcoin and cryptocurrencies have been hit hard. With Bitcoin trading under $40,000 , many are asking if it is time to buy the dip. My acquisition of Bitcoin is different. I have been buying on a monthly basis regardless of the price. I suggest this type of dollar cost averaging for long term investments including the stock market. Then I have a separate portfolio…or a trading account, to make shorter to medium term swing trades. In this article, I will presume most readers are here for the latter. So is it time to get back into crypto?
I have stated on Market Moment, and other Equity Guru Youtube video series and articles, that Bitcoin is acting as a RISK ON asset. Contrary to what the Bitcoin bulls say, the crypto is not acting as a safe haven. Not yet.
Because Bitcoin is a risk on asset, it has followed the price action of US stock markets. If markets fall, Bitcoin does too, and the opposite case is true. So the real question is whether the stock markets have bottomed. Things however, get a bit complicated with this recent news: Biden Administration to Release Executive Order on Crypto as Early as February: Report
It was a matter of when, not if. We all knew government regulations would be coming. If this report is true, we should expect it in upcoming weeks. Here are some key points : The directive would place the White House in a central role overseeing efforts to set policies and regulate digital assets, Bloomberg reported.
The Office of the Comptroller of the Currency (OCC), Securities and Exchange Commission and Commodity Futures Trading Commission have issued guidance letters, informal statements and public rule-making efforts to direct how different aspects of the crypto industry should comply with federal law. But these efforts have not been coordinated in a single document or by one agency.
This type of news, and anticipation of this news, will cause some volatility in the crypto markets. If stock markets rip and Bitcoin and other crypto’s do not follow, we will have confirmation that the crypto space is wary of regulations.
Above is the chart of the S&P 500. As you can see, US stock markets have been battling it out at support all last week. Friday saw an epic green close. Things are looking bullish, but I would say that we still remain in lower high territory (basically, we can make another recent low) as long as we remain below 4500. If we can get a daily close above 4500, I turn full bull.
The Bitcoin chart has been in a prolonged downtrend. Multiple lower highs and lower lows. For a market structure trader like me, the chances of a reversal are increasing. I just need signs and confirmation. What would I be looking for? A close above the highlighted area above, the $40,500 zone. I bet this happens with the S&P 500 closing above 4500. I just realized the numbers are similar. 4500 vs 40,500. Spooky.
If Bitcoin does not close above this zone, another lower high can be confirmed taking us down to $30,000. A huge support there, and if that breaks, we would be talking about $20,000 Bitcoin which is a bit crazy to think about.
With regulations incoming, it will be interesting to see how Bitcoin and other crypto’s react. I have said that the biggest danger is a government central bank digital currency, because it would be in the best interest of the central bank to heavily regulate Bitcoin. Central banks have held the monopoly of creating money. If things don’t go to that extreme, regulations will be positive for Bitcoin because larger funds and institutions will enter. The thing holding them back right now is the lack of regulations, mainly depositor insurance.
However, Bitcoin would stop being what it was originally created to be: money that is away from the hands of big government, big corporations, and the big banks. The DeFi space is what I am focusing on. It is becoming what Bitcoin was originally supposed to be. Money frontrunning government regulations is heading to DeFi. Citizen banking is a good term to use to describe DeFi. To be honest, my money would be on Square Inc . Jack Dorsey stepped down as CEO of Twitter to focus more on Square. Oh, and by the way, the company changed its name to Block Inc. ..a sign of where they tend to take things.
But here are a few companies to keep on […]
source Is It Time to Buy the Crypto Dip? WFLD.V, COIN.NE, BIGG.CN and DEFI.NE
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