Another Leg Down for Bitcoin?

bitcoin

Market momentum is Yellow. Yesterday, we witnessed another uptick in the markets and a quick move into Yellow territory. However, Apple’s news of slower spending and a pullback in hiring pulled the market lower. Be cautious. Cash is again your friend.

Bitcoin sits in focus after a dismal first half of 2022. Cryptocurrency as a sector has dropped as much as 66% to start the year. So naturally, investors are wondering if they should buy the dip or sit on the sidelines. Today, I want to talk about how to trade Bitcoin (BTC-USD) properly. Most people claim to have a system or a strategy or a secret coin that will make them a zillionaire. 

As I point out today… you just need one thing. I give away the free momentum indicator every day at Haven Investment Letter. Use it. I’ll show you how.

It’s Momentum, Stupid

Momentum is a measurement of capital inflows and outflows in the market. I can time it down to the day by analyzing thousands of stocks. My primary way to determine negative momentum is to examine real-time outflows in the market among institutions and net-sellers. 

Momentum has gone negative three times in 2022. The moves occurred on January 13, April 6, and June 8. Take a look at the chart below. This is a chart of BTC prices declines after momentum went Red in 2022.

Following each date, we saw pronounced declines in Bitcoin. And since that June 8 move, BTC has not recovered in any significant manner. Positive momentum events have been sporadic. There was January 28, which coincided with a large amount of insider buying in stocks. 

BTC increased from January 28 until the next negative switch on April 6. But it had a very sharp downturn afterward. If you want to buy some BTC, I recommend waiting until you see the word GREEN at the top of this letter. And if it goes red again, be quick to sell.

Where Does Bitcoin Go From Now?

The start of the earnings season hasn’t been as great as advertised. Investors are largely sitting on the sideline in cash, waiting for any positive news to push stocks higher. Volumes remain very light. 

Bitcoin has been a primary indicator of a possible squeeze in the stock market – especially during oversold conditions. However, the broader outlook is rather bleak, according to Bloomberg. According to a recent MLIV Pulse Survey, about two-thirds of investors believe that Bitcoin will hit $10,000 before it hits $30,000.

I find this relevant because of recent conversations with large cryptocurrency holders. While in Nassau, Bahamas, for the first FTX-SALT Cryptocurrency Conference, I spoke with a few “whales” in the Bitcoin space. These are individuals who own more than 1,000 BTC. 

I asked them at what point do they capitulate – or sell when prices get too low. The range of prices I heard was $12,000 to $16,000. Those figures are largely in line with where Bitcoin hit its 2017 peak. The consensus is that they could buy it lower – possibly in the $5,000 range in the future. 

Again, I’m sitting on cash in this situation. While I understand the basic narrative and believe in the future of BTC, I dumped my coins back in January, and I haven’t looked back. I think there will be another rally, but I’ll use a momentum indicator to pick my entry point. I’ll be back tomorrow to talk charts, data, and investment ideas. 

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

Related Articles

Snapchat

The Problem with Snapchat

Market momentum is Green, BUT I’m moving to cash. There was something very unusual about today’s tech selloff: The sheer amount of selling in FAANG

Read More »