Bitcoin and Altcoin Correction. Don't Panic. #71
Market Meditations | January 11, 2021
After today’s newsletter, you will know how to trade red days like today.
Dear Meditators
As usual, Twitter approaches hysteria given any indication of a BTC dip.
After today’s newsletter, you will know how to trade red days like today ?
Let us learn to be profitable and composed traders, whether the market is bullish, bearish or somewhere in between.
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Block.one CTO Daniel Larimer Announces Resignation ✌️
Chief technology officer (CTO) Dan Larimer of crypto project Block.one, which is the firm behind the EOS blockchain, has announced his resignation on Sunday stating that ‘all good things must come to an end’ and that he is leaning towards focusing his attention on ‘creating tools that people can use to secure their own freedom’. EOS price is down more than 30% since the announcement. Read more.Long-Desired Bitcoin ETF Could Actually Hurt Price in Short Term ?
JPMorgan analysts wrote that currently the Grayscale Bitcoin Trust (GBTC) is the only way for institutional investors to gain access to bitcoin and therefore trades at a premium by being the only game in town. An ETF would likely hurt investors who paid a premium on GBTC in the second half of the year leading to increased selling pressure after the mandatory six-month lock-up expires. Read more.Binance Partners With Orbs Blockchain to Launch a DeFi Accelerator ?
The leading cryptocurrency exchange Binance has teamed up with an Israeli blockchain company called Orbs to be the first core sponsors of a DeFi-related program. Dubbed DeFiOrg accelerator, it aims to enhance the research, development, and community engagement in the decentralized finance field. Read more.Bitcoin Whales Profiting As ‘Weak Hands’ Sell BTC ?
Statistics governing wallet balances from Glassnode on Jan. 11 reveal that the main investors “buying the dip” are those with a balance in excess of 1,000 BTC ($36 million). “Don’t be part of the #BTC transfer to billionaires, corporations and hedge funds” entrepreneur Alistair Milne warned Twitter followers while responding to Simos’ findings. Read more.
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Bitcoin and Altcoin Correction. Don’t Panic.
We asked, you answered and now we deliver.
For this article, we take a look at the 2017 bull market to see whether we can learn from past market behavior and whether this could be a good buy opportunity for those that felt left out.
Later, I focus on altcoins and whether they are holding strong against bitcoin, which could be a sign for what we can expect in the next few weeks.
Markets don’t go up in a straight line.
New market participants that recently bought after others convinced them that ‘number go up’ learned their first valuable lesson.
When there is no resistance on the way up, support on the way down is likely to be thin as well.
Those of us that were here in 2017 have become immune to this kind of volatility knowing that in a bull market, days like today are healthy and necessary in order for the overall uptrend to continue.
Bears have temporarily taken over control of the market and until some higher time frame levels are reclaimed, it makes sense to remain cautious until the market has found a bottom.
Has The Bull Market Ended?
In a great Twitter thread this morning, Synthetix co-founder Kain Warwick shared what tends to initiate corrections like this.
As the market goes up without signs of a big correction, leverage builds up slowly which is ultimately the required ingredient for a sharp drop like we’re seeing today.
In the early stages of a bull market, holders are not capitulating or panic selling after the first 20% correction in months.
It’s the selling pressure from leverage trades getting liquidated that leads to a snowball effect and an acceleration of the ‘crash’ until the market finds a level where long-term holders are willing to accumulate again.
The market reverts back towards the mean in search of longer-term support.
Has the market bottomed or can we expect prices to move down even further?
Nobody knows for sure.
The difference in buyers (retail vs institutional) between 2017 and now is a strong argument that we might not see that deep 35-40% pullback like we saw back then.
That said, we haven’t seen a correction of more than 20% since the lows in March, so going down ever further cannot be ruled out either now that momentum has temporarily shifted in favor of bears.
Always have some dry powder available to take advantage of opportunities that present themselves.
Calling tops and bottoms in this market is a fool’s errand.
Even if you are considering buying the dip, you should choose your entry wisely. You can find some of our insights in today’s livestream.
The bounce that follows will likely be equally aggressive, but traders must make sure to not get liquidated before that actually happens.
Many traders will be considering buying this correct dip. Before you do so,
Before we move on to altcoins, there is something else we should stress here.
Market Meditators, if this correction has caused you to panic, the chances are you are overexposed to crypto.
We have created a full FREE ? Risk Management ? course for you.
The best traders in the world put in place proper risk management frameworks. Follow their example and protect your capital.
What About Altcoins?
As I’ve written before, altcoins have ‘higher beta’ meaning that they are essentially leveraged bitcoin positions.
The moves are bigger on both sides of the coin.
An altcoin going up 50% in a day doesn’t surprise anybody who has been in crypto long enough, but that also means that during corrections they fall back deep, often retracing 30-50% from their highs while taking out all the stop-losses that have accumulated over the last few days/weeks.
DOT/USDT
Many altcoins are now retesting prior high time frame resistance levels as support.
Panic selling on red days like this isn’t the best choice most of the time.
You either panic early or sit tight and wait for a reversal while managing your risk properly.
Letting your emotions cloud your decisions is the most common mistake that traders make.
Currently we’re watching $8.2 as our key DOT resistance. Claiming this should result in upside continuation.
ETH/BTC
The benchmark I’ve used for altcoin strength still looks healthy.
The 0.03BTC support, confluent with 0.382 level, is essential to maintain a bullish bias. Should it hold, we can expect Ethereum to hold relatively well against bitcoin for the remainder of the correction which would be good for altcoins in general.
If this is indeed a correction before the higher time frame uptrend resumes, altcoins could potentially outperform bitcoin in the foreseeable future once the market finds its bottom.
Remain patient and manage your risk.
The crypto market tends to overextend on both sides so playing with leverage in these conditions should only be done with the proper risk management in place.
Conclusion
This is not the first correction to happen in our space and it is not the last. Panic should not be your response to the current market conditions. If it is, the chances are you need to reconsider your risk management. Corrections are a normal and at times healthy part of a bull run. History has shown us this. They offer dip buying opportunities and also fresh opportunities in altcoin markets. Do not let your emotions cloud your trading strategies.
On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on as well as content we will be sharing.
Wednesday, 13th January
Market Meditations Releases Airdrops Newsletter ?
On Wednesday, Market Meditations will be releasing an exclusive newsletter on previous and future potential airdrops. Providing our readership with the opportunity for substantial reward with only small effort. And, there is of course the added upside of using breaking technology.Binance XRP Delisting ?
A reminder that XRP will be delisted from Binance. US effective 10am.
Thursday, 14th January
Blockstack (STX): Stacks 2.0 Mainnet Launch ?
The Stacks ecosystem is approaching an incredible milestone: The Stacks 2.0 mainnet launch. Stacks 2.0 brings secure apps and smart contracts to Bitcoin, unlocking a new wave of innovation upon the world’s most robust, most valuable blockchain.Swipe (SXP): Cannon Public Sale ?
Cannon is a permissionless and decentralized layer that enables cross-chain digital asset interoperability between various blockchains. Cannon is powered by Cannon Token (CAN) which enables users to run nodes and participate in protocol governance.
Friday, 15th January
Big Banks Earnings Day ?
On Friday we will see how the world’s biggest banks have been performing financially. Citigroup, JPMorgan and Wells Fargo all release their results.
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.
