The Crypto Fam (@TheCryptoFam) recently took to Twitter to explain how to identify the bottom of the bitcoin market.
Obviously, it’s been a tough year to spot the bottom of the bitcoin market. Every time we think the market has bottomed out, it sinks even further. It’s been difficult for investors to time the market.
Fortunately for us, The Crypto Fam is here to help. The Crypto Fam has spotted trends linked with every bottom of the bitcoin market. In a thread of tweets, The Crypto Fam explained how to time the market to maximize your returns.
1/ HOW TO IDENTIFY THE BITCOIN BOTTOM: A Thread pic.twitter.com/9KqI7ygqst
— The Crypto Fam (@TheCryptoFam) June 22, 2018
Here’s what The Crypto Fam uncovered.
The user begins by stating that,
“Since December 2017, Bitcoin has been in a bear market. Professional analysts and casual investors alike (us included) jumped the gun and declared the bottom at each new dip. In this thread, we will explore the simplest and least risky method to call a bottom with confidence.”
Calling the bottom of any market is a daunting task. However, The Crypto Fam isn’t attempting to pinpoint the “exact” bottom of the market.
“Calling the bottom on any asset is a daunting task; however, calling an exact bottom is simply not necessary to profit, especially in cryptocurrency.”
In other words, there may not be an appreciable difference for the average investor between buying bitcoin at $6100 and buying bitcoin at $6150 when the price rises to $10,000. Market swings in the crypto industry are so large that, unlike with traditional stocks, timing the bottom isn’t as crucial:
“Why isn’t it important? The size and magnitude of movements in cryptocurrency have always been HUGE. Bear markets often result in cryptos losing 80% of their value, while bull markets result in 100x gains. In the end, a 10% difference in your entry price hardly matters.”
The Crypto Fam encourages users to stop trying to buy the bottom. It’s not necessary. Using strategies like dollar cost averaging, you can buy at the relative bottom without stressing about minor short-term market movements.
How to Spot the Bottom in Today’s Crypto Market
Now that The Crypto Fam has established why the absolute bottom isn’t important, let’s look at how the user spots the relative bottom:
- The Crypto Fam cites Investopedia, which claims markets form bottoms in two different ways. Markets form bottoms when the asset undergoes a climactic sell-off that leads to three-to-five times the average daily volume, often over a number of sessions. Markets can also form bottoms when the asset enters a dormant phase where it continues to fall while volume dries up, leading to lower than average daily volume, often for weeks or months.
- The Crypto Fam claims bitcoin’s 2014 bear market accurately reflects the second option. It was a long-term, gradual sell-off. There were few bitcoin buyers throughout the sell-off, leading to a slow bleed in the price of bitcoin.
- The Crypto Fam claims the 2018 BTC bear market is comparable. The sell-off has occurred gradually over an extended period of time, but it has occurred slightly faster than the 2014 bear market. Because of this, The Crypto Fam believes we’ll arrive at the bottom sooner in 2018 than we did in 2014.
- Here’s where the bottom drops out. Eventually, in a slow bleed scenario, the market reaches a bottom. The initial volume of this bottom can be quiet until a critical point of resistant. At this point of resistant, high-volume finally arrives.
- The Crypto Fam cites chart data from 2014 when volume surged immediately as bitcoin dropped below $200.
- Because of 2014 chart data, The Crypto Fam believes that investors should wait to see high volume before they buy. High volume indicates a breakout from the bottom.
How Can You Make Money From This Information?
Here’s how The Crypto Fam summarizes his thoughts on finding the bottom of the bitcoin market:
“You will NOT miss the next Bitcoin bull run if you simply wait to see high buying volume. You might miss the absolute bottom, but you save yourself the distress of losing more money in a bleeding market. You will have ample time to buy close to the bottom.”
In other words, stop trying to look at the daily price of bitcoin and time the market to find the absolute bottom. Instead, wait to see a surge of buying volume. This indicates a critical support level and the bottom of the bitcoin market.
Overall, The Crypto Fam is bullish about the price of bitcoin.
“Few deniers of BTC remain. Payment solutions giants (Dorsey, Thiel), bank execs (Blankfein from GS), and even gov. orgs (SEC, CFTC) understand its unique value. There will certainly be FOMO on the next run, but until then, we must be patient as market cycles play out.”
Ultimately, market volatility is one of the most thrilling features of the crypto industry. If you want to avoid guessing the price of bitcoin, just wait until you see high volumes surge into the market at a certain resistant point. It happened in 2014 when BTC dropped below $200. It’s unknown where the bottom of the bitcoin market will be in 2018.