BTC in a Holding Pattern
Dear Readers,
Who would’ve expected it. With price in an extended range, a multi-month holding pattern stretching for over half a year, neither continuing to the upside, nor severely correcting to the downside, but continuing to hold near all time highs.
Though price seems volatile in nominal terms, in those multiple thousand dollar moves, it is actually relatively stable - when has price previously in the history of Bitcoin moved sideward at the highest prices. If we zoom out we can see that there is quite a development in the price dynamic here as compared to earlier.
The Failure of Cycle Expectations
The pattern is broken, the cycle seems changed, and traders/ investors are confused. The market has undoubtedly changed here. I’ve always argued that a qualitative change was always to be expected due to the maturing of the market [as Bitcoin became increasingly capitalized]… and where such a maturation would be disruptive of the nice neat pattern that preceded. A Maturing Market was written with this in mind when price was 19K near exactly one year ago today.
The concept of a maturing market involves process and transition to a qualitatively different kind of market. Quantitative [quant] analysis is all very fine, but if the focus [interpretation] is purely data-driven it may simply look for a repeat of what has come before. And though of course technical analysis is in large part based on patterning there should be allowed also the import of wider forces that may serve to ‘warp’ the pattern… just as gravity in Einstein’s physics is understood to warp Newtonian space. Relativity not absolutes.
A maturing market also serves to explain what appears as an anomaly in the minds of many- why is it that the 200 moving week average no longer functioned as a support, with price remaining below it for an extended period? If we take increasing maturity/ reducing macro volatility/ eventual price discovery as our model, that is, as our interpretive apparatus, then this is no longer an anomaly. In fact, according to the model, this very long term average should be broken as support and come to function more as a mean of price… as an average around which long-term price action would oscillate. I’d go far as to predict that the 200 MWA will move upward eventually to the mean of the channel [dotted orange] with the bottom of the LGC channel [based on diminishing returns and an eventual relative plateauing of price] itself becoming future support.
Though it was of course difficult to predict the way in which this change would specifically develop, some kind of disruption was to be expected [i.e.; not to lead to disappointment and confusion]. The first disruption of course was the double top of the previous cycle that took the market by surprise. Then came the solid correction, which in turn has been followed on by a further disruption to the previous pattern - for the first time, price has near ‘stalled out’ on reaching the previous high levels instead of blasting straight through.
From the cyclic perspective, current price development could be perceived as puzzling and problematic, but I’d argue that from the LGC perspective, it’s not so. For the main focus of the LGC is not on cycles but is rather on an extended and converging channel, within which price is predicted to develop. This path, first projected in 2018, has played out while the predictions that were based on cycles were invalidated.
Add to the LGC model that the logic of a logarithmic growth curve developing in price is based on the idea of a maturing market, one with diminishing returns and eventual price discovery/ capitalization, and you have a further explanation of this price action, over and above the prediction of price itself.
So back to an overlay of the model onto the chart, and combined with straightforward technicals in order to see whether alarm in price development is warranted or not.
‘Stalling Out’ or a Holding Pattern?
While many seem to fear that the price is ‘stalling out’ here, with the LGC model in mind current price action looks rather to be in a holding pattern. There is a relative stability to the price range just as there was to the run-up to that price range which was of a more technical as opposed to a parabolic/ over-heated nature. Once again this signifies a maturation of the market that is moving more technically than parabolically.
As seen in the following chart, what I refer to a holding pattern, the multi-month price range, looks to currently be coming in for a soft landing on the longer-term upward diagonal of support. Add to this, that price is also coming back to the buyzone - something that has proved itself extremely useful over the past 6 years as the zone to buy - and one can have some confidence in the continuation of strengthening prices once the consolidation has run its course.
And lastly, the real kicker of a possibility below. If price is to remain strong yet volatile within the LGC channel going forward, one may need to reconsider their strategy for taking profits… unless they do not mind an extended higher timeframe for doing so.
Personally, I choose to trade the extra volatility of alt coins against USD in order to realize/ take profits… both on higher and lower timeframes. This also functions as a hedge against that very long core position and hold in BTC.
Until next time,
Stay [relatively] safe out there,
Dave the Wave.