Crypto Super Cycle TOP?!
Updated: Jun 20, 2022
Technical Analysis 101: Is this time different?
Thanks for taking the time to read today's blog post where we take a look at Crypto sentiment, the fear and greed index and how we are approaching the market from here.
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The fear is palpable in Crypto right now.
All eyes are on Michael Saylor, the Chairman and CEO of MicroStrategy ($MSTR), a publicly traded business intelligence firm that he founded in 1989. He's over leveraged on Bitcoin and has a 'paper loss' of $1.6 Billion. That's right, billion!
We've also had some really big events that happened in the Crypto Space:
Crypto token, Terra, and its sister crypto coin Luna, $LUNA (USD), plummeted after the "stable coin" de-pegged from the US dollar which sent shocks through the Cryptocurrency market. This is obviously not suppose to happen, as its supposed to maintain a 1-to-1 peg with the US dollar. Luna lost 98% of its value in one week!
'UST is a decentralized stable-coin that mints and burns tokens to stabilize the price in line with the dollar in a bid to avoid the volatility associated with cryptocurrencies.'
Potential Insolvencies by Three Arrows Capital (3 AC) and Celsius:
Crypto Lender Celsius, a centralized lending and borrowing platform established in 2017, halted withdrawals as Crypto plummeted with users creating basically a 'bank run' on the lender. Celsius is facing a liquidity crisis basically due to the fact that if every customer were to withdraw their balances, they would not have enough liquidity to reimburse them. Bank runs occur when depositors withdraw their money en masse due to fears that the institution will become insolvent.
3 AC is one of the world's largest crypto hedge funds and was apart of the decentralized finance (DeFi) ecosystem that is also facing liquidation. There are rumors that they are also potentially insolvent as they have failed to respond to others in the Crypto community in regards to their margin calls. "3AC failing to meet a margin call arose after the company began moving assets around this week to top up funds on decentralized finance platforms such as Aave in order to avoid potential liquidations as the price of Ethereum (ETH) fell this week. According to unconfirmed reports, 3AC faced liquidations totaling hundreds of millions of dollars from multiple positions."
In addition, there are headlines like this: 'Seven of the world’s richest crypto founders have lost a combined $114 billion since November, estimated by Bloomberg.'
The "smart money", you and I that followed our rules on trading and investing made good smart decisions to get out of the market and take profits. Others, who have been fooled or swindled into dollar cost averaging are getting margin calls or having there accounts blown up! We make every effort to let others know this has happened to many in market cycles before too!
You don't need to go through it though. We got you!!
Essex Trading has been very vocal that Bitcoin would hit $20,000 this year and our CEO, even went on @wolf_financial's Twitter Spaces informing all of our followers and the audience that this was very likely to happen. We've stated the following in our past blog posts and it bears repeating:
Remember, it's important to take profits and pay ourselves, this is what being disciplined helps us do on our trading journey and compounds our portfolios long term. There will always be another trade or investment, so it's important to take profits to ensure we keep building our long term capital.
When we enter a position or investment not only do we have to know when we want to enter we have to know when to exit too! Euphoria as we all know is a part of market cycle and is important to understand that we can ensure that we are exiting before huge selloffs where many are getting liquidated.
How can we do this?
Market sentiment provided to us by the Crypto Fear & Greed Index.
We can even see below how accurate it has been in showing turning points in the market when on November 9th, 2021 we got a measurement of 84 which coincided with a top and a failed breakout a chart pattern we have explained previously.
So we've taken profits, we've been disciplined at each follow through in the market and now maybe we're even short or hedged against a long term position that we've started in case a bear market occurred.
Is it time to short or is time to go long, or maybe even do nothing?
Now we can use the Fear & Greed Index to give us a better idea of what to do from here. No surprise here, we hit the lowest level ever in the past year with a an Extreme Fear Reading of 6.
This is where people start to panic and make ASININE decisions. Trust me. We have done it before and as always we stay disciplined no matter the market or situation. Using risk management and stops helps us get reduce our emotions and shift that energy to our trade and investment strategy. These are techniques I deploy in my private feed, that has recently been created to give my followers insight on charts I am looking and targets so you can know before the crowd.
Remember, we have a plan.
On the other end of the spectrum...
DON'T GET TOO GREEDY!
So even when the Fear & Greed Index reaches 90 on November 6th, 2020 we don't get euphoric. This when we hear about that 90% of the total Bitcoin Supply has been mined, a rare copy of the U.S. Constitution is sold at a Sotheby's Auction to Ken Griffin's Citadel, Bitcoin Upgrades, like Taproot and