As was becoming evident last weekend, the last week was all about crashing for crypto market. We will go into the details of the significance of the crash we have had, but first a bit on the long term picture. I believe we are heading for a Bitcoin price of $2000 USD in the short-term, possibly a bit higher. Then after that, going down gradually before a major bounce. The end of C in the chart below is a real possibility.
I will not go into much detail on the daily BTC chart this time. Theoretically however, it is possible that we could still be bullish, but this is definitely unlikely at this point. Going below 3k would invalidate any bullish scenario completely.
Altcoins usually over perform to the downside versus BTC. We are extremely close to invalidation of a long term bull market. Possible bottom targets for market cap in the chart below.
Although market psychology can be a bit difficult to gauge, there appears to be some “buy the dip mentality” and not widespread panic yet. This goes at odds with the extremely bearish signal the last week has given and is classic delusion making further downside likely. However, if we cross 3k, it fully invalidates the chances of a bull market for a lengthy period of time and then it seems likely we could be getting a bottom within a relatively short time. Most likely this will not be a long term bottom, but at least signal a large bounce.
Altcoins are already in a depression, and it is to be expected that the altcoin rally which recently failed will accelerate this into a situation of greater and greater despair. A lot of projects will most likely die and never recover.
Although I generally avoid fundamentals in my forecast I would like to address three things on this occasion: Coronavirus, money supply, and BTC halving.
The corona virus is having obvious effect on the markets and the economic ramifications of this will take quite some time to fully manifest. Since gold and silver also are underperforming there are signs of that we could be sliding into deflation, where everybody will want to hold fiat.
By observing gold and silver’s relative underperformance in the current stock market crash, it is possible to infer that we could be getting deflation in the short/medium term, where only fiat reigns as a safe haven. This is worst case scenario for the world economy and it will be fought by any means necessary. This usually ends up drastically increasing the available money supply and a short phase of normality follows. However, since this is impossible to accurately predict the outcome of, hyperinflation is almost a given if these stimuli packages are launched. In a hyperinflation scenario, safe havens will be sought to preserve value and it is indeed possible that BTC will get a role here along with gold and silver.
BTC mining reward halving has happened only twice before and was both followed by bull markets. However, it is reasonable to assume that the bull markets were not caused and neither correlated with the event. Statistically two prior events is too small of a sample to assume any correlation. Fundamentally, money supply expansion being so minor in BTC already (arguably negative), a halving does not have any significant effect on available supply.
Having a poorly risk managed portfolio at the moment must be considered very dangerous. We could be seeing years of downside and many assets might go to zero.
White Mountain Charts and Trade Signals