Bitcoin (BTC): Post Capitulation Outlook And Way Forward

Bitcoin (BTC) bounced off the $6,000 many a time but major players in the market were still not convinced that we have reached the bottom. Before the beginning of a new Bitcoin (BTC) cycle, we have to see a strong capitulation, a final shakeout to wipeout all remaining weak hands. If the last few days have shown us anything, it is that history may not repeat itself but it does rhyme. Looking at the above monthly chart for BTC/USD, many would argue that history has already repeated itself. Even those that do not agree with this view cannot deny the strong similarities between the two cycles visible on the market. It is quite clear from a quick glance that the price action during the current cycle strong resembles the price action of the previous cycle.

If we look at the BTC/USD chart between 2015 and 2016, we can see that the price did capitulate before beginning a new cycle. The capitulation is seen as the only red candle between the green candles just next to the triangle. A lot of people in this market would have us believe that the market is due for an extended correction and that the price may still fall the same way as it did in 2014. However, they do not seem to realize that the extended correction has already occurred. Of course, it cannot happen with the same magnitude as it did in 2014. If the price cannot rise with the same magnitude, why should it have to fall with the same magnitude? The price of Bitcoin (BTC) has now found a support above the triangle just as it did during 2015. Is that a coincidence? I don’t think so.

Chart for BTC/USD (1W)

Throughout the history of financial markets, we have seen that long-term patterns are hard to tamper with. Some powerful people in a nascent and unregulated market may try to manipulate the price on a shorter time frame, but the big picture remains intact most of the time. This is because most of the patterns that we see before us on the big picture are pre-planned. They are meant to be that way. Whenever the price has to top out, we see something like an exchange hack that just proves to be the major catalyst to crash the market from its all-time high. Similarly, when the market is about to capitulate, we see a similar catalyst but of a smaller magnitude. In this case, we saw the hashwar leading to the Bitcoin Cash (BCH) fork which resulted in most investors overreacting and hence brought about the capitulation, successfully delivering what was required by the charts.

Sentiments may change short term, but long term if the market is supposed to grow; it only does so because most people believe the same thing. Think about it this way: the stock market has been in an uptrend after a large number of corrections, crashes and depressions. That is because people believed in the long-term potential of the market. The people who got in before the dot com boom and held even as the bubble popped and the crash followed, they still made a hefty return on their investment compared to the people who chickened out and put their profits in the bank.