Bitcoin shot through its historical highs and continues sharply upwards.
If you were only eyeing BTC and now you feel like you missed a big opportunity then you may be tempted to jump in a Long position now, as the prices are skyrocketing.
My advice would be not to do this. One of my general rules is: Don’t buy at highs and don’t sell at lows.
Buying the Bitcoin now would be buying for the highest prices ever.
What I would prefer is to wait for a pullback = for the price to drop a bit. Drop where? To a place where big institutions were placing many of their Long positions.
Such an area is around 19.000.
I used my Volume Profile indicator to look into the current uptrend. There is one place in this area that really stands out. In this area (19.000), huge volumes were accumulated. After this volume accumulation, the price shot upwards.
This tells me that in this heavy volume area strong Buyers were building up their Long positions.
When there is a pullback into this area again, those Buyers should defend this zone. They should become active and push the price upwards again.
And that’s why this 19.000 zone should work as a strong Support.
BTC/USD; 4 Hour chart:
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How Institutions Work
At the end of this brief analysis, I would like to warn you about Bitcoin. The way I look at it is that Bitcoin has become pretty popular.
Big funds and institutions who will be giving end of year reports to their shareholders and investors will want to have a big share of Bitcoin in their portfolio. Why? Because these investors will 100% ask them “Did you buy BTC for my investment portfolio?” They will ask because they see BTC skyrocketing the whole year, right?
How would a portfolio manager look like if he said, that he hadn’t bought BTC for them? He would look stupid since it seems everybody is making money on BTC. Not having it would look like a missed opportunity.
So, there is the end of the year and the fund managers start to buy BTC because they don’t want to look stupid when they file their end of the year reports without a share of BTC in it.
This could be in my opinion one of the reasons the BTC is doing so well in the last couple of days.
Will Bitcoin Crash After New Year?
What if there is a crazy selloff in January? BTW. I wouldn’t really be surprised by that.
Those portfolio managers would say – “Well, everybody was in BTC, it’s not our fault it fell. Everybody had it, we are not stupid. Nobody could have known it would fall. You yourself wanted to have BTC in your portfolio!“
Funny, right? But that’s how it often goes.
Why I am writing this is because I want you to consider all the possibilities and do a bit of critical thinking before investing into skyrocketing and popular investment products like the BTC.
In my opinion it is way better to learn how to trade properly, with an actual edge (like for example Volume Profile), rather than following the crowd and buying popular products without a second thought.
I hope you guys liked today’s article. Let me know your thoughts on Bitcoin (or the other cryptocurrencies) in the comments below! I am really interested in what you think.
Happy trading!
-Dale
“Well, everybody was in BTC, it’s not our fault it fell. Everybody had it, we are not stupid. Nobody could have known it would fall. You yourself wanted to have BTC in your portfolio!“ hahaha
Great article . that’s really make sense .
It all depends on timing… bought BTC around 4500K after the Corona-Crash (when everybody was laughing at BTC was no safe-heaven). Now that I know, there´s a big support at 19K, I would guess the selloff could shake out everybody FOMOing with SL at 20K. From this view, it could make sense, BTC will raise from 19K support again to new highs. If not, it ll crash it ll die, smart heads invest and next 1-3 years it ll resurrect again. Thanks Dale. 🙂
Hello Dale,
What do you think about holding out for BTC go down to around 1750….to “fill the gap” that was recently created near that level. I see that volume is more or less healthy around that level…but not as great as at 1900. Here is the question: If it comes back to around 1900, what might clue us in that it would head lower…say to around 1750 before that hoped for bounce to the upside again ??