BITCOIN Why you shouldn't be scared to buy 20% dips

2021년 1월 6일

So Bitcoin had a rather sharp pull-back on Monday, which reached -20%. Many traders got scared to enter the market but to the surprise of many, the fall got bought back immediately and in 1 day all losses were erased. It is interesting to mention that the rebound happened on the 4H MA50, as I described on my post last Sunday (see below):

In this cross-cycle comparison study, I show why that shouldn't surprise you and why you shouldn't be scared to buy such dips and accumulate BTC.

As you see on the chart below, during the last Parabolic Phase of Bitcoin's previous Bull Cycle (in 2017), such -20% pull-backs were quite common. In fact, if we count the the two -18% dips as 20%, then we had a total of 5 times that the price pulled back that much during the last parabolic phase. As Parabolic Phase, I denote the period after the former All Time High (ATH) broke.



As seen on the chart, during that period, we had a -30% correction 4 times and 1 time the price dropped by -40%. It is important to note that on the 1D time-frame (both charts displayed in this study are on that time-frame), the 1D MA200 (orange trend-line) was never made contact with, 2 times the 1D MA50 (blue line) initiated a rebound, while the 1D MA100 (green line) kick-started a rise 3 times (so naturally the MA50 didn't hold 3 times).

So back to the present day and Cycle (and the main chart of this study), since the former $19900 ATH broke in December, we may consider that we have entered the Parabolic Phase of the Bull Cycle, in a similar fashion as in 2017. So it should be no suprise that the -20% pull-back was bought, as based on the previous Cycle, chances were that it would. If we want to broaden our horizon, a -30% drop from the current levels would be around $25000, making a nice contact on the 1D MA50 (blue trend-line). Again with extremely high probabilities of being bought back. A -40% drop (remember only happened once in the previous parabolic run), would be around $21500, which would make contact with the 1D MA100 (green trend-line).

This is just to show why if you are a buyer you shouldn't panic on such occasions and should have the composure to buy such dips. Let me know your thoughts on that and if this can be a useful framework for you moving forward.


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