BTC/USD MOMENT OF DECISION - COMPLETE BEGINNER'S WALKTHROUGH
10 minute read, you have been warned.
This will be a detailed walkthrough comprised of key points for both the bulls and the bears. Technical analysis will be done at a beginner-intermediate level. Readers are encouraged to look up vocabulary they do not understand, because hey, it's almost 2020, everyone can use Google and TradingView has their own wiki.
We will begin with fundamental analysis.
Why is crypto worth anything? Why are there trillions of dollars in this relatively new financial space? Is it a castle in the sky? Is it actually a valuable asset? Why does this weird mathematical abstract thing have value? Why?
To answer questions in order to support a fundamental long or short stance on any asset or stock .. screw it, anything that you can attach a price to that may change over time: you have to dig pretty deep into the woo-woo of what's really going on in this world. Just stick with me for a bit.
Why does anything have value at all?
Do we value a material or abstract good for the ownership of the object itself?
No, of course not. We want things for their services. Scarcity of these services drives price gain. Better services are also more expensive for a single unit.
Lets compare crypto to fiat in terms of their services:
Oh also, we will examine the
C - Confidentiality
I - Integrity
A - Availability
of the asset. These are the three core pillars of web security, and can easily be extended to judge the overall security of a digital asset. I pulled this straight from my college senior level Computer Security textbook, by the way. Really dense read, but worth every word if you want to truly do fundamental analysis on blockchain assets. It's pathetic how quickly some of these fintech guys will fall apart as soon as you start to poke holes in their whitepapers over their security. Also yeah, let me call one of them out: IOTA. Are you guys serious? Do you think you have Google-level ability to hire swarms of CS Security PhDs for 200k a year in order to make sure not a single self-driving car, or heck, even a toaster gets hacked? I mean, you guys are seriously trying, I see that, but making the leap from blockchain to DAG right now is totally not okay. In theory, yes, it is that much faster, but you're basically trading the 51% attack for a whole new host of bigger issues. A bigger institution needs to take on this task. I'm looking at you Amazon: this is the big takeover chance for you guys. If Amazon ever drops a DAG crypto, buy it to the moon, because it would just fundamentally revolutionize capitalism itself.
Anyways, crypto vs fiat:
Crypto:
Anonymous in most cases - High Confidentiality
Public/private key cryptography allows for public read access of the blockchain for Integrity purposes
Very secure, mathematically sound (Take it from a Silicon Valley fintech wiz: I have personally done basic CBC-blockchain encryption. It works. I've done frequency analysis on byte-code output, tried to calculate mathematical brute force solutions against blockchain type encryption. Totally solid, and verified by mathematicians worldwide. It'll be fine until quantum computers.) - Top Integrity
Cannot be counterfeited or forged - Top Integrity
Cannot be robbed in most cases, especially cold-storage hardware wallets - High Integrity
Low-transaction fees and fast send times for modern blockchain (ERC-20 and better) - Good Availability
Huge liquidity in terms of market cap of stablecoins and volume between core assets like BTC/ETH/stablecoins, accessible from any $100+ smartphone - High Availability
Limited supply of key assets forces scarcity - Bad for long-term availability of symbolic and valuable precious digital assets, ie. BTC/ETH/LTC
Good store of value - long term view for crypto will never hyper-inflate
Fiat:
Used for person to person transactions in (usually) small quantities
Circulated heavily through banks and tied to government identification - No Confidentiality
Bills are tracked by government, leaving a paper trail regardless - No Confidentiality
Can be counterfeited, forged, and stolen in some cases - Low Integrity
Available everywhere, except tied to nations. USD is not true international currency, and you're better off with an international travel credit card with no transaction fees than actually try to carry tons of fiat to the country you're visiting and eating arbiter fees, especially if you need to be all over the place. - Neutral Availability
USD is loaned out to US by China. Federal bank increases the interest rate to cheat debt. Every US citizen and corporation holding fiat, even the government itself, loses value. USD is not backed by gold since 1970. Inflation rates have been triggering exponential growth indicators for the last 30 years: aka. run-away inflation risk is high. Saving for retirement in USD probably not the best call for young people today. Bad store of value.
I'm not slamming fiat. It's nice, it's not heavy, and that stuff is pretty. And tangible. But paper money has been out since the printing press, and you can look that date up yourself. It's old tech. Crypto is new tech, so of course it wipes the floor with fiat in every category of fundamental analysis, especially when it comes to security. We have reached the tipping point where crypto is hitting critical levels of AVAILABILITY. Anyone with a crappy 5 year old refurbished cellphone and decent 4G can start buying and using cryptocurrency to its full capacity. Do you know what that means?
1) People should be willing to pay a premium for crypto assets because they provide a better service than fiat.
2) Developing and third world countries now have access to crazy stuff like crypto backed credit lines that have more 3% interest on stablecoin collateral than APY ????!? (I'm looking at you Nexo) Are you telling me that the oppressed masses of the world now have access to financial firms that don't check your identity and give you rates SOLELY based on your FINANCIAL CREDIBILITY and NOTHING ELSE?
If you hate dealing with real world problems, skip number 3.
3) Look, this world is completely effed if nothing changes. If we don't fix greedy unchecked accumulating wealth exponential growth with no regard for sustainability capitalism right now, Mother Earth is going down and she's going to take us with her. Close out this article if you don't agree with me, you shouldn't be trading anyone's money. There is a theory that roots in classical economics about this: infinite growth theory. That if we accumulate wealth and invest it, the dividends of the future outweigh the damage we're doing now. That if we double down on technology, we can cheat the rules of this Earth. If the fish die, we find a substitute. Everything can be substituted, even the trees, we'll make plastic and artificial ones. When all the oil runs out, we'll just have better technology by then. Capitalism is already as good as it can be, and we should just laissez faire to the max and everything will be fine. Don't worry about it.
Okay, that theory is 60 years old. And based on ideas that are even older. When we were bootstrapping ourselves towards the stars as humans, firing the first steam engines and cranking the first pulley driven mills, we had no clue what was about to hit us in exactly 130 years. The internet? Computers? Artificial intelligence? Hello? Nothing was really abstract at the time. Everything was pretty human to human in the 1850s. This may as well be dystopia ... or utopia to a time traveler coming from the 1850s. We are at a tipping point, not only in crypto, but the financial flow of the world. Technology is about to hit that point of accumulation where it is ready to truly take off. I won't rant about AI singularity right now, but all I'm saying is we have the mathematical tools, theoretical ideas, and accumulated capital in the hands of a few visionaries to really take off technologically right now. But the thing is, the timing isn't right. What the heck are we using AI for these days? To turn the lights on and off for us when we cross the doorway of our home? To make really crappy celebrity memes? We could really help the world with this technology.
And blockchain currency is the gateway to that technological advance in a REAL direction. Because crypto will allow the oppressed of this world easy access to the ability of bootstrapping themselves. And when their voices are heard because they too move the waves of the great financial market, we will have to listen to them as a collective. Maybe we can all agree to double down and go long on sustainable, long-term growth as a world. That's my vision for crypto, and that's fundamentally why I will always be long.
CURRENT MARKET ANALYSIS:
Fundamentally, we are long on crypto for the aforementioned reasons.
We are looking at the long term trend, each bar representing a week of time.
We can peer back about a year and a half at this zoom level to see what we can find in terms of trends.
Purple dashes is the top of a long descending channel from the all-time high of the chart.
Magenta dashes (hard to see) is the bottom of the same channel.
Green dashes along the green ribbons is recent bullish pressure.
Recently, price broke below aggressive bullish trend. Currently price is cutting into some of the long term MMAR ribbons. As such, we can see the squeeze breaking downward. MACD is swinging back towards 0 as some of the long term supports provide brief reprieve. Sell volume is slowing down below average levels. We are seeing some consolidation and weariness in the market. The bottom MMAR ribbon is located around 7300. We have not broken below that support, which coincides with Kijun-sen of the Ichimoku Cloud. The cloud is represented by the greyed out area.
Critical things to watch for:
MACD signal line is about to go negative, amplifying future sell signals.
Squeeze accelerating downward and can break the market downward at any moment.
ADX possibly retracing upward as Stochastic MTF peaks and troughs at the 30%-70% levels means a breakout in either direction is possible, and will be very violent when it happens. I believe from the MA that the price will continue to fall. There is also a DI+/DI- crossover (DI+ green, DI- red, ADX blue lines on the second up from bottom chart). If these lines diverge in their current trajectory combined with a spike in ADX and volume we could see the price obliterated below all current "normal" psychological baselines. If we break below 7300, free-fall to 5k-6k levels are likely. If the price breaks the long-term conservative downward channel with enough momentum around 4800, which coincides with the Senkou B line, we might just be dead for awhile. Accumulation would have to begin around absolute baseline levels of 1k-3k. Depends on how greedy and willing to be patient the whales are. And if I know anything about whales, they are THE MOST GREEDY and PATIENT people. The next moonshot upward will test something like 11350 to be safe, but we could just slingshot lunar orbit and keep going if the bull run is epic enough. Nothing is set in stone. Nothing is destiny. At a certain point, this is just cooperative abstract modern performing arts with numbers and math and prices.
If you're not playing with margin, wait a few weeks for maybe new supports around 5k-6k or lower. Just wait to buy at the true bottom. If you are margin or future trading, play risk safe as shakeouts are always possible in an unsure market. Ultimately with the proper stop-losses and the right risk management, even a small short position can become hugely profitable in a free-falling condition. Just don't forget that eventually the momentum will always retrace into a long term buy-signal. Anything can happen at any time with a massive volume spike. Watch for that as final confirmation of opening a medium to long-term position.
This will be a detailed walkthrough comprised of key points for both the bulls and the bears. Technical analysis will be done at a beginner-intermediate level. Readers are encouraged to look up vocabulary they do not understand, because hey, it's almost 2020, everyone can use Google and TradingView has their own wiki.
We will begin with fundamental analysis.
Why is crypto worth anything? Why are there trillions of dollars in this relatively new financial space? Is it a castle in the sky? Is it actually a valuable asset? Why does this weird mathematical abstract thing have value? Why?
To answer questions in order to support a fundamental long or short stance on any asset or stock .. screw it, anything that you can attach a price to that may change over time: you have to dig pretty deep into the woo-woo of what's really going on in this world. Just stick with me for a bit.
Why does anything have value at all?
Do we value a material or abstract good for the ownership of the object itself?
No, of course not. We want things for their services. Scarcity of these services drives price gain. Better services are also more expensive for a single unit.
Lets compare crypto to fiat in terms of their services:
Oh also, we will examine the
C - Confidentiality
I - Integrity
A - Availability
of the asset. These are the three core pillars of web security, and can easily be extended to judge the overall security of a digital asset. I pulled this straight from my college senior level Computer Security textbook, by the way. Really dense read, but worth every word if you want to truly do fundamental analysis on blockchain assets. It's pathetic how quickly some of these fintech guys will fall apart as soon as you start to poke holes in their whitepapers over their security. Also yeah, let me call one of them out: IOTA. Are you guys serious? Do you think you have Google-level ability to hire swarms of CS Security PhDs for 200k a year in order to make sure not a single self-driving car, or heck, even a toaster gets hacked? I mean, you guys are seriously trying, I see that, but making the leap from blockchain to DAG right now is totally not okay. In theory, yes, it is that much faster, but you're basically trading the 51% attack for a whole new host of bigger issues. A bigger institution needs to take on this task. I'm looking at you Amazon: this is the big takeover chance for you guys. If Amazon ever drops a DAG crypto, buy it to the moon, because it would just fundamentally revolutionize capitalism itself.
Anyways, crypto vs fiat:
Crypto:
Anonymous in most cases - High Confidentiality
Public/private key cryptography allows for public read access of the blockchain for Integrity purposes
Very secure, mathematically sound (Take it from a Silicon Valley fintech wiz: I have personally done basic CBC-blockchain encryption. It works. I've done frequency analysis on byte-code output, tried to calculate mathematical brute force solutions against blockchain type encryption. Totally solid, and verified by mathematicians worldwide. It'll be fine until quantum computers.) - Top Integrity
Cannot be counterfeited or forged - Top Integrity
Cannot be robbed in most cases, especially cold-storage hardware wallets - High Integrity
Low-transaction fees and fast send times for modern blockchain (ERC-20 and better) - Good Availability
Huge liquidity in terms of market cap of stablecoins and volume between core assets like BTC/ETH/stablecoins, accessible from any $100+ smartphone - High Availability
Limited supply of key assets forces scarcity - Bad for long-term availability of symbolic and valuable precious digital assets, ie. BTC/ETH/LTC
Good store of value - long term view for crypto will never hyper-inflate
Fiat:
Used for person to person transactions in (usually) small quantities
Circulated heavily through banks and tied to government identification - No Confidentiality
Bills are tracked by government, leaving a paper trail regardless - No Confidentiality
Can be counterfeited, forged, and stolen in some cases - Low Integrity
Available everywhere, except tied to nations. USD is not true international currency, and you're better off with an international travel credit card with no transaction fees than actually try to carry tons of fiat to the country you're visiting and eating arbiter fees, especially if you need to be all over the place. - Neutral Availability
USD is loaned out to US by China. Federal bank increases the interest rate to cheat debt. Every US citizen and corporation holding fiat, even the government itself, loses value. USD is not backed by gold since 1970. Inflation rates have been triggering exponential growth indicators for the last 30 years: aka. run-away inflation risk is high. Saving for retirement in USD probably not the best call for young people today. Bad store of value.
I'm not slamming fiat. It's nice, it's not heavy, and that stuff is pretty. And tangible. But paper money has been out since the printing press, and you can look that date up yourself. It's old tech. Crypto is new tech, so of course it wipes the floor with fiat in every category of fundamental analysis, especially when it comes to security. We have reached the tipping point where crypto is hitting critical levels of AVAILABILITY. Anyone with a crappy 5 year old refurbished cellphone and decent 4G can start buying and using cryptocurrency to its full capacity. Do you know what that means?
1) People should be willing to pay a premium for crypto assets because they provide a better service than fiat.
2) Developing and third world countries now have access to crazy stuff like crypto backed credit lines that have more 3% interest on stablecoin collateral than APY ????!? (I'm looking at you Nexo) Are you telling me that the oppressed masses of the world now have access to financial firms that don't check your identity and give you rates SOLELY based on your FINANCIAL CREDIBILITY and NOTHING ELSE?
If you hate dealing with real world problems, skip number 3.
3) Look, this world is completely effed if nothing changes. If we don't fix greedy unchecked accumulating wealth exponential growth with no regard for sustainability capitalism right now, Mother Earth is going down and she's going to take us with her. Close out this article if you don't agree with me, you shouldn't be trading anyone's money. There is a theory that roots in classical economics about this: infinite growth theory. That if we accumulate wealth and invest it, the dividends of the future outweigh the damage we're doing now. That if we double down on technology, we can cheat the rules of this Earth. If the fish die, we find a substitute. Everything can be substituted, even the trees, we'll make plastic and artificial ones. When all the oil runs out, we'll just have better technology by then. Capitalism is already as good as it can be, and we should just laissez faire to the max and everything will be fine. Don't worry about it.
Okay, that theory is 60 years old. And based on ideas that are even older. When we were bootstrapping ourselves towards the stars as humans, firing the first steam engines and cranking the first pulley driven mills, we had no clue what was about to hit us in exactly 130 years. The internet? Computers? Artificial intelligence? Hello? Nothing was really abstract at the time. Everything was pretty human to human in the 1850s. This may as well be dystopia ... or utopia to a time traveler coming from the 1850s. We are at a tipping point, not only in crypto, but the financial flow of the world. Technology is about to hit that point of accumulation where it is ready to truly take off. I won't rant about AI singularity right now, but all I'm saying is we have the mathematical tools, theoretical ideas, and accumulated capital in the hands of a few visionaries to really take off technologically right now. But the thing is, the timing isn't right. What the heck are we using AI for these days? To turn the lights on and off for us when we cross the doorway of our home? To make really crappy celebrity memes? We could really help the world with this technology.
And blockchain currency is the gateway to that technological advance in a REAL direction. Because crypto will allow the oppressed of this world easy access to the ability of bootstrapping themselves. And when their voices are heard because they too move the waves of the great financial market, we will have to listen to them as a collective. Maybe we can all agree to double down and go long on sustainable, long-term growth as a world. That's my vision for crypto, and that's fundamentally why I will always be long.
CURRENT MARKET ANALYSIS:
Fundamentally, we are long on crypto for the aforementioned reasons.
We are looking at the long term trend, each bar representing a week of time.
We can peer back about a year and a half at this zoom level to see what we can find in terms of trends.
Purple dashes is the top of a long descending channel from the all-time high of the chart.
Magenta dashes (hard to see) is the bottom of the same channel.
Green dashes along the green ribbons is recent bullish pressure.
Recently, price broke below aggressive bullish trend. Currently price is cutting into some of the long term MMAR ribbons. As such, we can see the squeeze breaking downward. MACD is swinging back towards 0 as some of the long term supports provide brief reprieve. Sell volume is slowing down below average levels. We are seeing some consolidation and weariness in the market. The bottom MMAR ribbon is located around 7300. We have not broken below that support, which coincides with Kijun-sen of the Ichimoku Cloud. The cloud is represented by the greyed out area.
Critical things to watch for:
MACD signal line is about to go negative, amplifying future sell signals.
Squeeze accelerating downward and can break the market downward at any moment.
ADX possibly retracing upward as Stochastic MTF peaks and troughs at the 30%-70% levels means a breakout in either direction is possible, and will be very violent when it happens. I believe from the MA that the price will continue to fall. There is also a DI+/DI- crossover (DI+ green, DI- red, ADX blue lines on the second up from bottom chart). If these lines diverge in their current trajectory combined with a spike in ADX and volume we could see the price obliterated below all current "normal" psychological baselines. If we break below 7300, free-fall to 5k-6k levels are likely. If the price breaks the long-term conservative downward channel with enough momentum around 4800, which coincides with the Senkou B line, we might just be dead for awhile. Accumulation would have to begin around absolute baseline levels of 1k-3k. Depends on how greedy and willing to be patient the whales are. And if I know anything about whales, they are THE MOST GREEDY and PATIENT people. The next moonshot upward will test something like 11350 to be safe, but we could just slingshot lunar orbit and keep going if the bull run is epic enough. Nothing is set in stone. Nothing is destiny. At a certain point, this is just cooperative abstract modern performing arts with numbers and math and prices.
If you're not playing with margin, wait a few weeks for maybe new supports around 5k-6k or lower. Just wait to buy at the true bottom. If you are margin or future trading, play risk safe as shakeouts are always possible in an unsure market. Ultimately with the proper stop-losses and the right risk management, even a small short position can become hugely profitable in a free-falling condition. Just don't forget that eventually the momentum will always retrace into a long term buy-signal. Anything can happen at any time with a massive volume spike. Watch for that as final confirmation of opening a medium to long-term position.
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