TIME

Dear Readers,

It seems we’ve come to yet another moment in the episodic career of bitcoin that’s marked by demoralized sentiment. This article will look to examine how this is just that, a repeat episode that is part and parcel of this market, and accordingly to be considered Bitcoin normal. In order to do this, it will be useful to contrast the element of volatility to that of time.

Where volatility is represented by the y/ vertical axis of the chart, time is represented by the x/ horizontal axis. Naturally, we tend to focus on the y axis of volatility and price, where in doing so it is easy to neglect the element of time involved. Time is just as significant as price, and without it you wouldn’t even have a chart, and without a chart you wouldn’t have anything to orientate yourself in this market. Indeed, it will be my contention that the volatility of price not only distracts us from the time axis, but also actively distorts our perception of the market, of price development.

Volatility

Price moves up and fast, the market gets excited, and those that exited re-enter, and the price moves higher yet again. Think of market sentiment as a rubber band. At moments such as this, sentiment gets heated, expands and stretches, and keeps stretching with excitement that in turn becomes exuberance. The feverish pitch is reflected in a hyper-present state of mind, where the current price/ number becomes the all-consuming focus. Of course, the rapid run up and expansion of price is unsustainable, just as a feverish state of mind is. The consolidation sets in, and in our analogy the rubber band contracts. With that contraction enters a lethagy and boredom relative to the recent excitement. The focus is still on that high number, now becoming the ‘norm’ of the market, and when increasingly lost the sentiment turns negative…. but still hopeful. Yet hope has something like a ‘half-life’, over time it diminishes, and eventually decays into despair. And yet on the chart, when we look at it through the technical lens, there is nothing new going on here. This is Bitcoin normal - as they say, a [secular] bull market climbs a wall of worry. For all intensive purposes, it’s as if the market is placing a cat and mouse game with us, or rather, with our sentiments. Which brings us to conceiving of the market as ‘Conglomerate Man’.

Conglomerate Man

There is nothing new in this term, which has been used to refer to the market as a whole [consisting of a conglomeration of market participants/ individuals]. The point of using it here is that it ‘humanizes’ the market to a certain extent and allows us to think of it in terms of time, which in turn might allow us to compare a larger time frame to our own.

Time, from the psychological perspective, is duration, a word associated with endurance. Not only do trader/ investors have volatility to contend with [the usual focus] but so too do they have to contend with time/ endurance. In this respect, you could say trading/ investing is an endurance sport.

Without a re-focus onto the rational technicals, that serves to ‘pace’ ourselves, we soon become ‘exhausted’ after having first been stretched to the limit on the higher prices. The market has played us, so to speak, and we lay spent waiting for the coup de grace.

The chart fixes this. In looking at the patterns, the behavior of the market… or our Conglomerate Man, we now know what to expect. Though we cannot with certainty say which way price will go, whether a continued parabola, or a solid correction, we’d not be surprised with either, or worse not be demoralized. Akin to warfare, against an unpredictable and powerful opponent, we’d have to make use of some strategy, accept the reality of some losses, while looking to make that eventual win on a greater time frame, one more commensurate with Conglomerate man.

Time

And so to bring these speculations back to the chart with a focus on the time element from a more technical perspective.

First of, the macro based on the LGC model, where the long-term chart really looks to grapple with Conglomerate Man of the Bitcoin market from the investor/ hodler’s perspective. Price looks to currently be sitting midway in the channel, on the basis of the LGC model, with a series of 38% relative corrections of the moves up. Keeping in mind that price can turn on a dime [as previously], you’d need to see a break of that 0.38 level/ 58K to lean toward a scenario of a deeper correction back toward the buyzone.

Given price is outside the LGC ‘buyzone’ for the investor, only a break to new highs would warrant an entry for the latecomer to the market leaving open the chance to buy lower prices.

For longer-term holders with a current position, there is nothing problematic at all about the chart. If there is further downward movement in the ‘shorter term’ [on Conglomerate Man’s timescale], it can be absorbed as higher prices are to be expected at a later date [based on the LGC that has performed since 2018].

The real question facing the long-term holder, who may have bought higher prices, is not the way in which price will move in the short term, but how exposed they are. If overly exposed they might want to protect themselves. If given the right weighting/ amount of exposure, from a risk-management perspective, they can afford to sit and absorb the risk of lower prices in the interim.

And lastly, to zoom in from the macro to the more medium time-frame, a time-frame that is still wider than the one our sentiments in a perma-present mindset are too often influenced by.

Here the focus is on time. The current range of price is still shorter than the previous ones, where price eventually broke to the upside. That said, a move upward within this range is required soon if this pattern is not to be broken. If this pattern were broken, then the correction is likely to be deeper and entail a correction of the whole move up off the bottom, where a retracement to the LGC buyzone as support becomes more likely. Price targets in that scenario as sketched in the previous article BTC Contingencies 2

In summary, from the perspective of the longer-term chart, the tendency is for sentiment to over-react on the downside, and the more so as that downside becomes prolonged. More often than not, the bounce when it inevitably comes is when sentiment is at its worst. Investors that have bought the buyzone are in a good position while it is unlikely that even late entrants, that may have bought high, do not have a huge concern of a parabolic correction before them. Rather, as compared to the half year move up to the midway point in 2019, this move has taken well over a year and is of a more technical/ less parabolic nature.

Until next time,

Stay, relatively, safe out there,

Dave the Wave.

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