Markets and Prices
Only Sharks Will Feed on the Crypto Market’s Elusive Price Bottom
2018 was a year of market bull traps and sliding prices. Now, as the year comes to an end, many cryptocurrency traders have been discussing the elusive “price bottom” for their favorite digital asset. However, pro traders understand that catching a falling knife is difficult and that elusive market bottoms can disappear within the blink of an eye.
Also read: A Look at Some of 2018’s Most Popular Cryptocurrency Traders
Catching the Falling Knife
When the market is up and extremely bullish it’s easy to predict swings in either direction and make some quick bucks. But when the price of a certain asset has been in a downward spiral for close to 12 months, guessing where the coin will bottom out is a lot harder. Guessing the exact moment of capitulation is almost impossible and usually only the lucky catch extreme price bottoms.
In reality, a digital asset like BTC drops a few legs down in price and the value ‘flash crashes’ momentarily. Only a handful of brave souls will catch the candle’s deepest wick. Traders are walking on a razor’s edge shorting the price of BTC with 100x leverage on Bitmex in the hope they will catch that elusive bottom. Some sharks with deep pockets have extremely low orders placed on exchanges waiting to feed on capitulation.
Wagers Placed on Lower Crypto Prices
A great indicator of the ‘bottom feeding’ trend is the short positions placed on various markets that offer margin trading. BTC/USD short positions are extremely high this week on Bitfinex with 38,488 shorts resting on the exchange on Tuesday, Dec. 18. Short positions for BTC/USD touched an all-time high on Dec. 7, surpassing 42,000 shorts on Bitfinex. Other top cryptocurrency markets like ETH and BCH have also seen a great number of short calls over the last few weeks. The same day on Dec. 7, ETH/USD shorts on Bitfinex reached the highest level ever with over 426,000 positions. Although since then ETH/USD shorts have dropped considerably, there are still more shorts today (302,000) than there have been all year long. This indicates that a large portion of traders believe that the price bottom of the top cryptocurrencies has not yet been found.
BTC/USD short positions on Bitfinex on Dec. 18, 2018.
Sharks With Deep Pockets Looking to Bottom Feed
Another place to view the hungry sharks waiting to feed on capitulation is the order books of the most popular exchanges. Most depth charts only show a fraction of what people are willing to pay or sell their bitcoins for on order books. However, you can look at order books even further on certain exchanges to see all the hungry bottom feeders waiting for a quick flash crash.
For example, on Bitstamp’s BTC/USD order book there are some huge 100 BTC or more orders for anything below the $2,800 price range. These traders have their fingers crossed that their orders will be filled during those precious seconds or minutes of pure fear-driven capitulation. Choosing a position is a guessing game as the price may stop at $3,000 or $2,800 but it could flash to $2,500 in the blink of an eye.
Erroneous BTC Bottom Predictions
The funny thing is that traders and analysts have been calling the bottom all year long and not one of those $10,000, $7,000, or $5,000 bottoms stayed for very long. There’s been a ton of bitcoin market bull traps and ‘dead kittens’ throughout 2018 and each time people thought the price had touched bottom. “May 2018 will be the last time we ever see bitcoin under $10,000,” Charlie Shrem told his 156,000 Twitter followers on May 3. In a similar instance, the notorious Max Keiser stated to his Twitter fans:
Bitcoin tested bottom at $6,000 and it’s now on track to post new ATH — $28,000 is *still* in play on this rally.
In contrast to McAfee’s opinion, BTC has suffered from an 82% correction since Dec. 17, 2017.
The Bottom Could Be a Quick Memory or Even Years Away
The “bottom” predictions last spring by industry luminaries were proven wrong and their erroneous forecasts, based on zero fundamentals, should be considered pure speculation. The fact is that predicting the bottoms and tops in the cryptocurrency market is extremely difficult and even when they do occur, price bottoms could be quick and painless or last for years. A great example of an evasive price bottom was the spike in gold spot prices back in 1980. Historians will remember that a troy ounce of .999 fine gold touched a high of $600 per ounce that year and on some exchanges as high as $850. It took 21 years for gold prices to touch a “bottom” when it touched a low of $256 per ounce in 2001, losing 57.33 percent of its value.
After the price of one ounce of gold touched a high in 1980 it took 21 years for gold to bottom.
It also took an awfully long time for BTC to find its bottom back in February 2015, going below $200 per coin. People will remember that BTC touched a high of close to $1,300 per BTC before falling throughout the entirety of 2014 and into 2015. Yesterday, cryptocurrency prices bounced pretty well on global markets, which coincidentally took place on the same day BTC reached $20k on exchanges one year ago. In some people’s subjective valuations, BTC’s nadir has already been reached, even though it is possible the market downturn continues. The truth is that cryptocurrency bottoms will be recorded in history, but predicting or seeing one as it occurs is largely a matter of luck.
What do you think about cryptocurrency luminaries calling the bottom for certain coins? Let us know what you think about the subject in the comments section below.
Disclaimer: Price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”
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