The King of of Crypto continued it’s massive pullback this weekend, which may have finally run out of steam.
Is this the bottom for bitcoin and a chance to play the longer-term trend higher at better prices than two weeks ago?
Is the Rout Over in BTC?
In case you were one of the few traders that actually “sold in May and went away,” then you just experienced a nasty drawdown in crypto assets that saw declines as deep as 60% – 70% among the top major crypto coins. Bitcoin was no exception as it fell from all-time highs just under $65K in April to retest the previous consolidation area between $28K – $40K that we last saw in January.
So, basically all of BTC’s gains for 2021 have been erased and for traders who have yet to jump into the crypto rally that goes back to the pandemic lows in April 2020, this could be an opportunity to hop in the longer-term rally at better prices. But will it bounce from here, or is this just a pitstop to more losses ahead for the bulls? Or will the market bounce around the previous consolidation area for a while?
Well the bull case has always been that crypto assets is the next evolution in tech, looking to disrupt the current monetary and financial networks of the world, and more. And as far as bitcoin’s story, the bull market’s collective vision seems to have morphed into a future where it may be a store of value and the most pristine form of collateral in the digital world. If that’s the case, then like gold, it will be in high demand everywhere, from individuals to the biggest institutions, and likely why we see banks close to offering bitcoin exposure in the U.S. (NYDIG Proclaims That 2021 Will See Hundreds Of U.S. Banks Offer Bitcoin)
If you prescribe to that narrative, or whatever reason you want to own bitcoin, then the 50% correction in May could be a longer-term opportunity to grab it at better prices. So, we’re putting BTC/USD on our buy watchlist as it looks the liquidation of leveraged players sparked by China and U.S. regulation fears may be over for now.
For new traders looking to start new positions, be on the look out for the market to stabilize this week and for bullish reversal candles to form on both the daily and weekly charts before considering building a longer-term position.
And remember that bitcoin, like the rest of the crypto markets, is a highly volatile asset. You’ll have to consider using more prudent risk management strategies like wider stops and/or smaller position sizes. Don’t leverage trade, especially in crypto as it’s highly volatile profile can wipe out accounts very quickly.
Consider small starter positions and scaling strategies to get your feet wet, and if we see a break below the previous consolidation lows (around $28K), then that may be considered as a trade invalidation pattern, especially if sparked by game changing news (i.e., confirmation of government crypto bans, blockchain hacks, crypto wales dumping, negative environmental developments, etc.)
What do you guys think? Is this broad market dip a long-term opportunity to buy BTC? Or are you looking to short and buy back into the U.S. dollar?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.