There has been a ton of bearish sentiment around Bitcoin in the past month. This is not surprising given the huge retracement we have seen since the turn of the year. Bitcoin has seemed to found a temporary bottom at just under 6k on February 6th. Since then it has rebounded strongly, almost hitting 12k a few days ago. So what’s next for Bitcoin? How should you be trading cryptocurrencies in the current market environment?
BTC Is Not Out Of the Woods
Despite the almost 100% move in Bitcoin in the past couple weeks, it does not mean the downtrend is over. Nothing goes straight up or straight down forever. Bitcoin was always going to have a decent sized bounce, since it pretty much has gone straight down from 17k to 6k in around a month. We have seen the bounce after the big dump, and it looks like the bounce is over now. It just faded below 10k in the past day.
It is best to stay in cash the next few weeks and let Bitcoin pick a direction. There is no A+ opportunities to the long side at the moment. For shorter term swing and day traders, price action is king. No one knows if Bitcoin will rebound or continue to fade in the near term. It is much easier to let Bitcoin pick a direction, and then join the trend, rather than try to guess. Bitcoin could fade off even more and break below February’s lows.
Recovery Will Take Time
If you are bullish on Bitcoin, it is not realistic to expect Bitcoin to return to all-time highs anytime soon. There so much supply between where it is trading now and 20k, it’s all-time highs. It will need time to heal and recover if it will return to all-time highs. We talk more about the future of Bitcoin in 2018 and how you should trade it in our recent webinar here:
Great Shorting Opportunity At the Moment
If you are an experienced trader, you have probably seen patterns like Bitcoin’s before. After a big dump, any asset will almost always have a dead cat bounce. We have seen a very large bounce in all the major cryptocurrencies the past two weeks, with cryptos bouncing as much as 60%-100% from their February lows. After almost 100% move to the upside, you are going to see a decent fade. In our cryptocurrency chat room, we have been playing cryptos like Ethereum to the short side. Here is a recent trade we took in Ethereum:
Kunal Desai is an American day trader (stocks and cryptos) and founder of Bulls on Wall Street and Bulls on Crypto Street, two online trading academies and informational publications. He has been featured in many high profile publications like Inc, Forbes, Buzzfeed, and Fortune. He has spoke at trading and business events all across the World.