Bitcoin plummeted to new lows as of November 21. Is it time to buy or to sell?
|BTCUSD, the most popular BTCUSD, the most popular cryptocurrency among traders, had cleared the area below $5000. Many traders are disappointed: some of them are still holding long positions for BTC against USD expecting it to get back to more comfortable price levels.
How do I see this situation?
First of all, to make a conclusion of what is happening with any financial instrument, we need to see the big picture first. Early in 2018, I've written in my social networks that we could see a price of $3000-$4000 for BTCUSD this year.
Take a look at the graph below. It's a "Commitment Of Traders" report that shows a permanent net short position of Large traders, who are involved in trading Bitcoin futures. Since the inception of Bitcoin futures back in 2017, a price of BTCUSD has been constantly declining, and the green line on COT-reports clearly shows who is control (Large traders who are betting against Bitcoin futures).
When we refer to COT-reports, we usually assume that there are two big groups of traders: "Large Traders" and "Commercials". The former group represents speculative trading (hedge funds, for example), the latter is associated with hedgers or producers. Normally, for any liquid market, producers and hedgers bring the real supply and demand to the marketplace, but not for Bitcoin. Commercial traders bring very little demand for Bitcoin futures market (if any), whilst most of the buying activity is generated by individual traders.
In others words, it is a game of pros against amateurs. It doesn't mean necessarily that pros will win in this game - there is so much uncertainty when it comes to the crypto world. But pros usually make less emotional decisions, based on data and in-depth analysis, and, statistically, they have better chances to win in the long run.
A very nice window of opportunity had developed a week ago, when volatility dropped to the lowest level in 2018 for BTCUSD. It was a tipping point for Bitcoin, which had a chance of breaking to the upside:
It never happened, and now, it turns out that BTC chart is heading to the $3000-$4000 area as expected. It may go even lower, and I hope to be smart enough to purchase it for investment purposes at those levels.
What about now?
Keep an eye on COT-reports. If you see net position of Large Traders continuing to decline, it might be the sign of a new wave-like selling, which is going to appear soon.
Technically, I assume to build short positions in the zone between 50 and 200-day moving averages with a target of $4000 (in case we see such a pullback).
All of the said above is my personal view. I hope it helps. Though, make your own conscious decisions. Good luck!
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