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The Crypto Bear Market – A Time to Prepare

In my last article on January 9th, I was asking the question “has Bitcoin peaked for this market cycle?”. Well, as far as I am concerned, we got the answer to that question over the last couple of days. The day I wrote the last article Bitcoin was already down over 40% from the all-time high set on November 10th. Over the last two days, Bitcoin has lost another 10% and more importantly, Bitcoin did something I was hoping would not happen.

Bitcoin Daily Chart

With the daily close yesterday, Bitcoin has closed below the September 21st low. If Bitcoin could have remained above this level it had the chance to technically keep the uptrend that began on July 20th intact. I guess though looking back it did kind of seem inevitable, Bitcoin had been acting very weak for quite some time. As a result of this latest breakdown by Bitcoin, the whole crypto market is taking heavy losses. Many altcoins are down 30% to 40% in the last week alone. As we are now witnessing, not much has changed as far as Bitcoin leading the market. Altcoins remain highly correlated to Bitcoin, at least for now.

Bitcoin Weekly Chart

The big question now, at least for me is. Where will this bear market bottom? And how long will it take to get there? It will be interesting to see if this bear market cycle is any different than in the past as far as depth and length. The previous two bear markets saw 85% plus declines from the peaks. They also each took about a year from the cycle peak to make the ultimate low. So far this time Bitcoin is down over 50% in a little over two months. An 85% decline this time would take the price of Bitcoin back down to about $10k.

The $30k level proved to be a very strong support level during the correction last spring and summer. It will be interesting to see if it will hold again if Bitcoin gets down that low. As I am writing this Bitcoin is just over $35k so it is not too far away right now. If the $30k level does not hold I would expect the price to drop down and test the 2017 high at around $20k. If that happens, I am not too convinced that the $20k level would hold either. It was the 2017 high but there is very little price history at that level to act as support. Looking at the chart below you can see the three support levels as I see them. It is also possible that Bitcoin could bottom out somewhere in between and enter a consolidation – accumulation phase.

Bitcoin Weekly Chart

Although I was really hoping that the bull market would continue with an extended market cycle lasting well into this year. I’m now accepting that the bear market that Bitcoin has been experiencing is more than just a temporary correction. I’m now convinced, although I have suspected it for a while, that the peak in November was the peak for this market cycle. That means that as painful as it was to go through the 2018 – 2019 bear market, we will have to do it again.

I definitely have mixed emotions, although I hate to see the bull market end. I am excited at the thought of rebuilding my portfolio with various crypto projects at steep discounts. So, now is the time to start preparing for the next bull market. It is probably too early to start doing any serious buying, but we can start by making a list of projects that will make up our portfolio. It will also be a great time to discover new projects that we can add to our portfolios.

I will be also using the time to reflect on this past bull market. I will be making notes of what I did right, what I did wrong, and what new lessons I have learned. After going through the last market cycle, I thought I would be much better prepared for this cycle. I have realized though that although overall I did much better, I still made some mistakes that cost me.

Probably the biggest mistake I made was jumping into and out of positions too often. I found myself trying to time the market swings and, in the end, I would have been much better off just holding them. I also tried too many times to buy into dips that just resulted in me getting stopped out of positions. Even though I did make some mistakes I was better prepared for this cycle. That experience helped me identify warning signs that allowed me to get out of the market at critical times.

So overall I am happy with my performance and with the additional lessons that I have learned I plan to do even better this next cycle.

Take Care!


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