Bitcoin is fairly valued now, but could stand to have a bullish week
Despite the pullbacks, Bitcoin is still sitting in a comfortable price range. But can it stay there?
What a week we've seen in global markets. It was certainly one for the record books, with traditional markets plunging their largest week since the Global Financial Crisis (GFC).
During the GFC, there was a 50% pullback in the traditional market indices across the world. People were angry as they parted with their money from the so-called professionals that were meant to manage it. Many lost all their retirement funds or superannuation and had to work for another decade to keep themselves going. This is where Bitcoin was born and why it is here now.
With gold and silver having some massive sell-offs over the week, we now have the opportunity for Bitcoin to play its part as an alternative asset vehicle to perhaps pull away from traditional markets and be a relatively non-affected market outside traditional markets.
As far as Bitcoin goes, of course, we have seen an astronomical move this year to kick the year off. We've seen Bitcoin go from $7,300 to a high that reached upwards around $10,500. That has resulted in a gain from the year around 44% in 2020.
Since the highs, we have pulled back around 20% as of now, which is not too much of an overextended move for Bitcoin as this is one of the most volatile markets in the world. It's pulled back into an area that could end up being very positive. That area is what I call the "Cradle Zone" and it's the zone in and around the 10 and 20 period exponential moving averages. I use this area as an equilibrium zone, or a zone of "fair value" to trade from.
Bitcoin has pulled back, but it's still around the Cradle Zone area. Historically, Bitcoin often pulls back into the Cradle Zone after large runs, and in the past, it's been known to come back from them in a big way. However, the positivity needs to continue with a bullish candle closing this week.
If we can see a little bullish candle this week on Bitcoin, then we have the potential for that to be a higher low on what is a weekly trend. If we do push to a new higher high in that weekly trend and push above $10,500, the market will look very strong and new all-time highs on Bitcoin could be on the cards for Q2.
This week is an important week, not just for crypto and Bitcoin, but also for traditional markets. A lot depends on what happens this week.
Are we going to see further downside or will this merely be a flash in the pan moment that everyone forgets about? I'll be keeping a very, very close eye on it this week and trading what I see, not what I think.
When to hold 'em
Bitcoin was originally made for people to buy and hold it though – when they're not spending it as money or trading it. There are a lot of reasons why people would prefer to just buy and hold it right now.
- You're looking at this as a diversification from your traditional market portfolio
- You're a little fearful of what could be a further decline in equities based off the back of this coronavirus
- You're concerned how the US election this year will affect prices
There is a bit more juice out there in the cryptocurrency marketplace due to the volatility, it’s how you use it that will dictate your outcomes. I wouldn't suggest going too crazy. Always make sure you speak to your financial professional before you make any decisions to get going.
When to fold 'em
If Bitcoin does move lower, there may be opportunities to short that market.
This is something that I do. I've been trading for over 14 years now, and for the last two-and-a-half of them, I've been trading cryptocurrencies exclusively because I love crypto's volatility! With the right tools, it's possible to profit from both the ups and downs.
Of course, this does come with extra risks and is usually for more experienced traders.
This is set to be a big week for Bitcoin, as well as traditional markets. But the best thing to do with this volatility depends on what happens next, what you want to get out of it, what tools you have available and how well you know how to use them.
TraderCobb is the host of the TraderCobb Crypto Show, and a full time cryptocurrency trader and educator. He has spent the last 14-years trading & traveling around the world, presenting to over 100,000 people on the way. He has been featured in Forbes, investing.com and on network TV.
Disclaimer: All predictions are for information purposes only, and reflect the author’s opinion. Their opinion may change over time. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.