2/11/2019 — Commentary on Friday’s BTC Rally

We here at BitOoda have been asked by some of our clients to comment on Friday’s nearly 300 point run in BTC.
Here are our broad thoughts on current market conditions:

  1. BTC is still in a bear market following the bursting of the 2017 bubble run.
  2. Price patterns are dominated by lack of liquidity.
  3. The success of both bulls and bears will be defined by prudent risk management until a clear trend develops.

Even a die hard BTC advocate cannot deny the bubbly-like nature of the 2017 price run up and ensuing 2018 collapse. This does not mean that BTC is dead; all it means is the psychology of the market got ahead of itself, and the self-reinforcing “feel good” price rally exhausted itself and broke the back and the bank accounts of the late entrants and stubborn holders. It takes time to recover from a blow like that. We have been mentioning the Silver market analog because we think human psychology stays the same no matter what the underlying financial product traded. Ever since the price peak we have had lower highs and lower lows, which is a signature of a bear market. From the silver analog we expect the final wave of desperation to take us to the mid-to-high $2000’s before the market starts the recovery. We could be wrong, of course, and until the 2018 low is taken out (it has not been revisited yet), there is a possibility that the selloff is done.

The market at present appears to be very illiquid. As a result, prices stay in a tight range for days, only to gap 200–300 points in either direction. That’s exactly what one would expect when an entity needs to either buy or sell any significant volume in a thinly-traded marketplace.

The current market is rather late in the selloff stage. We are more than 80% off the highs. While we are still in the bear market, any price correction can be significant. Our downside target is in the $2400-$2800 range. A short covering rally may easily take BTC to $4030-$4300 cluster of previous highs or even to $5600-$6000 support level that has become resistance. If the market exits a bear stage just a 33% retracement of the selloff would take BTC to $8700. Given how far both the upside and downside targets are, one must be nimble and manage their position in a way that insures capital preservation in case one’s view proves erroneous. Being comfortable with a 300-point gap one way or the other has to be part of your game plan.

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