Last week's recap:
I predicted BTC/ETH to sit at $4k/$300 and then SUDDENLY drop to $2500/$200, total movement within 2 weeks. And I was a very right, although I missed a tiny bit. Both coins did sit at the target prices, but BTC only fell to $2900 instead of $2500. ETH fell EXACTLY to the $200 I predicted. I anticipated BTC being oversold a lot more, but the market really stepped in to support at $3,000. Prices move for whatever reasons. There's always going to be noise to influence market movements. The disciplined trader (which I'm NOT) ignores all of it and just follows the charts, which don't lie.
Do as I say (not financial advice blah blah blah don't sue me), not as I do.
I was buying BTC/ETH around $4200/$290 to play the small bounces. I was unable to respond to the market in time to get out of those positions to rebuy later. I have to remind myself that I'm not able to do intraday trading, and so I need to pick my positions with that in mind. If I were actively day trading I'm pretty sure I would have made a killing this past week - o well, all I can do is improve and cope with my circumstances. I also bought into alt coins which lost 20-40% this week, but I'm not worried. As long as I don't sell the alts and BTC into USD, I'll still profit as long as I'm patient for prices to return. I can say this confidently because I bought everything under bases and not at peak prices. But it's a shame I can't make the 500%+ returns that'll be playable this upcoming week.
So we're left asking ourselves two questions : why did the price drop, and what will happen next.
Why did the price drop?
I believe there's many mini questions to answer before tackling this specific question.
1. How did BTC get to $5,000?
Well, obviously the market bought and sold BTC until it reached $5k. What I mean to ask is "what was the behavior of the market as BTC climbed to $5k?"
Aug 5th - 14th: breakout, increasing 43% from $3000 to $4300 with no resistance.
Aug 15th - 28th: resistance at $4300 with support at $4k
Aug 29 - Sept 1st: breakout, increasing 15% from $4,300 to $5,000
Sept 2 - now: crash to revisit support at $3k, which was previously resistance from 6/11-8/05
2. How could this have been foreseen?
Besides seeing the movement from all-time-high to all-time-high, a more important indicator is volume. From the first graph we can see that BTC easily shot up from ATH, but what we don't see in that photo is who is participating in that market.
"Those who cannot remember the past are condemned to repeat it."
This isn't the first time BTC has crashed, nor will it be the last. What can we learn from BTC's last correction: May 24 ($3,00) to July 15th ($1,800 - which was also a resistance in May ;) ? (On a 12 hour timescale on Bittrex)
Without going into details, the volume going into the $2.8k resistance on May 24th was about 6k, versus the 28k volume it took to finally break out of the $2,800 resistance on July 28th.
Now in August, we can see that volume from $3,300 to $5,000 was around 3k-7k, rarely did volume surpass 10k. Compare that to the 35k volume seen on September 15th, supporting from $2900 to $3800. This tell us the market is really behind a $3,000 base - don't expect to see BTC below this level anytime soon.
3. Will this happen again?
Yes. People will continue to overbuy and oversell. They fail to understand the the market is a team game. Only together can we all argue about a price and then come to consensus on a price. One man is no man.
Can you identify the next time this setup is happening (and even better if you see it in alt coins daily!)? And will you take actions when the opportunity presents itself?
What will happen next?
BTC is going to bounce between $4500-$3900 for a while.
What will I do?
Sell small positions around $4,800 and rebuy all I can under $4,400 (previous resistance turning to support). Watch volume, any bull move with 12k+ volume in 12 hours is a sign of a breakout coming. Bear movements with volume over 12k is a good time to sell and rebuy cheaper, but don't be greedy (like me) and sell/buy with smaller volume unless you're able to quickly react to the market and accept a small 5% loss.
p.s. I believe everything I said here can be applied to any crypto and other markets as well.
p.p.s. do this for ETH and get much high returns