I am quite confused about the direction of the crypto market these days. This is not something that happens to me often. Like many crypto investors, I am trying to understand the general sentiment of the market and I am getting conflicting results.
The chart below shows that the total value of the crypto market reached $3 trillion on November 11, and prices have been falling steadily since then. In the last two months, the total value of the crypto market has dropped by 31%. The definition of a bear market in the stock market is a 20% drop in prices from the peak. So are we in a bear market now?
We know that price volatility in the crypto world is much higher than in the stock market. Therefore, a 31% price pullback may not be interpreted as a bear market. Because in the past bear markets, there was a price decline of up to 80%. Besides, the bear markets in 2014 and 2018 came after bull rallies with exaggerated gains. So, the situation is quite different from the past. Certain altcoins are gaining in value relative to Bitcoin or even Ethereum. In past bear markets, almost all coins have lost value against Bitcoin.
Maybe it's better to set aside how to name the market and focus on what's going to happen. In the chart above, I have drawn the trend chart as a curve, as a straight line does not fully explain the price action of the past 2 months. Does the slope of the trendline indicate that the selling pressure is decreasing? The fact that the average true range indicator, which measures the volatility in the market, has been in a downtrend after the peak seen on December 4, indicates that the fear in the market has decreased significantly.
Bitcoin has recently rebounded from the 40,000 resistance line, disappointing those who shorted the market. Although technical indicators do not show that the downtrend has come to an end, the greens have started to appear more recently.
In the last weeks, I noticed that the performance of the market has been different based on days or even hours. At the weekend, prices are generally weaker than during the week. Also, prices are generally weaker during Asian market hours. Prices are generally stable during times when Europe and the US are trading at the same time. During the hours when only the US markets are open, prices are generally strong in the market.
Conclusion
My base scenario is that the downtrend will end in 1 or 2 weeks. But of course, I don't expect to predict the bottom of the market.
I had converted 40% of my portfolio into cash in the past weeks and I also added some cash to these funds. With this fund I created, I plan to make three-stage purchases. I made the first part of my purchase when I saw the 40,000 resistance working in Bitcoin. As the prices decline, I will buy with the remaining funds.
So what if prices don't go down? Then I would be glad that my current portfolio has increased in value.
As a matter of fact, the crypto market is not giving any pleasure while prices are falling. On the other hand, the declines are a buying opportunity. We'll wait and see what happens.
Thank you for reading.
