The naive investor is a die-hard fan of predictions. His immaturity leads him to seek precision in uncertainty. So often he falls victim to charlatans who make predictions, because they know very well that’s what people want to hear. Apparently, the public likes to be lied to. Many create false expectations, because it is lucrative. Unfortunately, quackery generates attention.
In this world, precision is not possible. Because the markets fluctuate quite randomly. So, forecasts are always made based on probabilities. Models from the past are often used to make projections. That, of course, does not guarantee that the projections will always be fulfilled. However, that does not mean that the analysis is wrong. It means that the unlikely also happens. Of course, a forecast is not the same as a prediction. The intelligent investor invests with the probability of a forecast and rejects the false promises of a forecast.
Markets tend to be more irrational in the short term than in the long term. That happens because of the laws of large numbers. Time works as a temporary diversification mechanism and this allows probabilities to be met with greater fidelity.
However, forecasts cannot be made solely by looking at the past. Other factors such as macroeconomics, sentiment, and demand levels also need to be considered. In other words, it is not a very good idea to rely too much on technical analysis and the use of charts. The models do not work very well in highly atypical stages. And I fear that we now find ourselves in one of these moments. These are extremely unusual times. And the models tend to fail more than necessary. Therefore, it is advisable to proceed with more caution than normal.
Headline inflation (US) eased somewhat in July, largely due to lower gasoline prices. This could be confirming to us that, indeed, inflation reached its maximum in June. In a way, the Fed’s actions are working. Which is quite a positive for risky assets like Bitcoin. Why? Well, because the moment inflation returns to 2%, in theory, we could go back to a looser monetary policy. How realistic is this expectation?
Bitcoin is still in its bear cycle. That has not changed. And we are reminded of that by the curvature of the 200 day simple moving average ($33.1K). That mobile still sits there like a bearish ceiling, reminding us that this story is not over yet. Bitcoin at the moment has managed to stay above fast mobiles. The 50 day moving average ($21.7K) is down and it doesn’t look as bearish as it used to. In fact, it is lateralizing. ANDAt the time of publication, we are above the 20-day moving average ($22.9K). This average was bullish, but it is already being lateralized as well. It is still a support. Which is not bad.
Last week we managed to break above $22.6K, but we couldn’t break our current resistance ($24.6K). The current volume is not up to scratch. Sentiment has indeed improved a bit with the good run in July. But the enthusiasm has dwindled quite a bit lately. The doubts are returning. And there is not enough force. If we don’t break out of this impasse quickly, a side channel could form again. The swing could remain between $22.6K-$24.6K. Above this channel, the new resistance is $28K. Which makes $25K a potential entry point for longs. If we break below $22.6K, for the shorts, $22K would be a possible entry.
The lack of volume suggests a lot of apathy on the part of the institutions. Suddenly, it’s not apathy. Perhaps it is a matter of caution. July brought us new hope, but you don’t have to count the chicks before they hatch. The market is beginning to suspect that inflation will not go away that easily. It is quite possible that the Federal Reserve will have to stay the same for much longer in order to win their fight. Personally, I think the Fed will have to raise rates higher than expected in order to tame the beast.. In other words, we still can’t claim victory. Because this winter can be longer, colder and more painful. Now, it is very likely that the year will end and we will still be in the $20K-30K range. In fact, this is one of the positive scenarios.
Every bear market has its rallies. There are red months. But there are also green months. The positive is that Bitcoin is showing conviction at these levels. I do not rule out a new scare. Nor do I rule out the possibility of a new capitulation. However, bWell we know that today we are closer to the bottom than before. The lower the price, the lower the risk. Which is positive for buyers.
Bitcoin is a risky asset. As simple as that. It is an emerging market. Totally immature. With a high regulatory ambiguity. Volatility is a reflection of this reality. Certainly, this volatility offers many opportunities. In other words, you can earn a lot of money. But you can also lose a lot. People enjoy the profits. But he usually feels the losses more. That means panics tend to be fast. But trust requires more time to recover. At these times, we need to be patient.
Of course Bitcoin is not just an asset. It is also a social movement. It is a kind of digital tribe with its own identity, its narratives, its friends and its enemies. The Bitcoin community, really, is a hodgepodge. There are many young people. There are many men. There are many retail and amateur traders. Much libertarian, anarcho-capitalist and conservative. Which indicates that there is a lot of contraculture and technophilia. And above all, there is a lot of appetite for risk.
The tribes, in general, fall into the error of believing in a false consensus. That is, they think that everyone believes what they believe. The truth of the tribe is the truth of the universe or something like that. Nevertheless, Bitcoin, to grow, needs people who don’t think like current bitcoiners. Bitcoin requires more capital to prosper. And that capital must come from abroad. The tribe can have all faith in their product. But that is not enough. Others are also required to believe in the product. And that will not be achieved with strange ideas or radicalism. Fanaticism unites internally, but frightens externally. Not very good at attracting investment.
The alliance between BlackRock and Coinbase is a big step. Because it means that Bitcoin is becoming more normal every day. Institutional investors will have more access to Bitcoin from a financial giant. Suddenly, we will not see the effect of this news in the near future. However, this union is extremely bullish for Bitcoin in the long term. Definitely a great reason for optimism.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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