In retrospect, the Bitcoin (BTC) futures chart was the chart to be looking at if you wanted to catch yesterday’s reversal (Figure 1). The Fib speed lines have been working perfectly there, and they continue to do so. That chart hurts because FOMO was an easy trap to fall into. That said, even though the FOMO trap yesterday was nasty, it doesn’t mean we should drop the bullish stance in Bitcoin (BTC).
To be balanced, there is one of two points of view to adopt.
First, is the idea of a deeper correction. There is Gann support near $7,000. Risk assets have problems because of the trade war. Bitcoin (BTC) could get caught in a coming storm.
The other idea goes by the acronym FIDO. That stands for “forget It, drive on.” Actually, the “F” really doesn’t stand for “forget,” it stands for a stronger word starting with “F.” Same idea and, frankly, we like the idea of using the stronger word.
The best reason to embrace the FIDO doctrine, buy the dip in Bitcoin (BTC), and continue on is simple: Massive bull markets do this type of thing. They suck people in and then scare everybody with what looks like a bearish reversal. Then, when people look for a bigger correction, the market just turns around and starts grinding higher and eventually explodes up.
Most likely, yesterday’s decline was because institutions sold out of profitable longs in Bitcoin (BTC). The long Bitcoin (BTC) positions were used to hedge against a drop in equities. Our guess is that they took profits on the Bitcoin (BTC) hedges, and will sell down their equities holdings because of the head and shoulders top in S&P Futures (ES, Figure 2).
Then, when they are done selling down stock positions, they are going to go right back into Bitcoin (BTC) simply because it’s the only thing going up. We continue to believe institutions have two choices for 2019: own Bitcoin (BTC) or perish. A revised set of Livermore work on an intraday charts shows there is a possibility Bitcoin (BTC) could recover and rip higher (Figure 3).
Of course, the big question is whether or not Bitcoin (BTC) can hold up in the face of a big drop in stocks. Frankly, we think that idea is old news, but we have to respect that the trade war and inverted yield curve could lead to a Black Swan event that hurts all risky assets.
Bottom Line: A move to $7,000 is possible. Our attitude is to focus, carry on, and believe. Bitcoin (BTC) is going to require conviction to make money if you go long and HODL.
Want in? Want out? The Crypto.IQ Trading Desk was its usual super-accurate self on this reversal move. Nobody manages crypto risk better than them.
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