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Is Cryptocurrency Dying?

We’ve all seen the headlines. “Is Bitcoin the New Pets.Com?” “Which Cryptocurrencies Will Survive the Altcoin Apocalypse?” and “Cryptocurrency Bloodbath: Bitcoin, Ethereum, and More Plunge?”

So you must be wondering: Is this the end of the world for crypto?

The answer is no. This is simply a healthy correction from previous all-time highs. Even if the price of bitcoin and the other altcoins drops another 50% that would just mean the bubble we’ve been in has finally burst. Which is a good thing by the way, as it means there are more buying opportunities at that point.

Why is all the news so apocalyptic right now if this is simply a healthy correction and we’ll eventually see a bullish trend reversal?

Because it gets clicks. It scares people into reading articles. It feeds the primal fear in all crypto investors out there that they’ll lose money and their crypto will be worthless.

There’s something really important that a lot of these sensational news posts seem to forget. Repeat after me: All markets are cyclical. They have a bull trend where they go up, a phase where they stay the same, and a bear trend where they go down.

When one of these trends happens does it mean the extinction level event has occurred and crypto as we know it is going to cease to exist? No, it doesn’t.

Reasons Why the Sky Isn’t Falling

Let me say this again: Doom is not nigh for crypto.

  • There have been no fundamental changes in the nature of cryptocurrency.
  • No seriously negative regulatory news (for example the US banning crypto) has come out regarding crypto.
  • Investors at large have not abandoned the market.

For me to be genuinely concerned about crypto’s demise, I’d have to see a piece of new information that indicated there was a fundamental flaw in the whole system. Thus far, that hasn’t happened. The main reason people are talking about the demise of crypto is that the price has fallen.

There have been no fundamental changes in the nature of cryptocurrency that warrant its demise. If you disagree, please, point me to the critical flaw that all cryptocurrencies suddenly share that wasn’t there in January of 2018.

Again, if there was a shift in the fundamentals, I’d be concerned. But there hasn’t been. The recent price drops are simply large market forces at play. It’s natural and in time it will correct.

The only other thing I’d be concerned about is if investors were leaving the crypto market en masse. Again, this has not happened.

The only serious news that has come out regarding bitcoin or cryptocurrency is the price drop itself. That tells me this is a natural correction and not the end of crypto as we know it.

Is the Crypto Bubble Bursting?

Now, this is a better question. No one can predict the future. I would rely on technical analysis to answer this question for me. I recommend you do the same.

If bitcoin falls below $5,800 or so, chances are it will drop below $5,000, and maybe even to $3,000. If it drops to around $3,000, I would classify that as a burst bubble.

There is an extremely strong line of support at around $5,800. If it breaks through that, I am exiting a portion of my bitcoin and may even short it. Have a look at the chart:

As you can see, the green line is the level of support. It’s important to note that support is a range and not an exact laser fine point.

If bitcoin breaks through that $5,800 area, it’ll be at a level it hasn’t seen since February of 2018. Grab a parachute should that happen because we’re in for a drop!

Opportunities to Make Some Coin

There are a few ways to profit off the current price action. They are:

  1. Buy bitcoin at around $6,000 with a very tight stop of $5,700-$5,800, aiming for 5-10% gains per trade.
  2. Use dollar cost averaging to get bitcoin at a cheap price.
  3. Wait for bitcoin to drop below $5,800 or $5,700 and short it with a stop above $6050.
  4. Bet against bitcoin indirectly by choosing a strong, bullish crypto and trading it in a BTC pair

Of the three, I’ve chosen #1 and thus far it’s served me well. I’ve regularly bought bitcoin at around $6,000 and sold it at $6,500-$7k. As of writing this article though, the bounces upwards from $6k have been weaker and weaker. So this strategy is becoming less profitable.

My second choice would be #2, dollar cost averaging. It’s a great hedge against lasting bear markets. Basically, in dollar cost averaging you buy bitcoin at set intervals. If we’re in a bear market, you’ll be getting bitcoin at cheaper and cheaper prices. Here’s an example of a dollar cost averaging spreadsheet.

One thing to note is that I am very reluctant to bet against bitcoin directly. An old stock trader’s rule is never bet against a strong stock.

That being said, I would have made quite a bit of money thus far if I’d done it in this case.

Personally, I’m bullish on bitcoin and believe its price will correct within a year, if not sooner. I’d be worried if I shorted it that the trend will suddenly reverse on me. If that happens, you could take a bath and not be able to cover your short. This is also known as losing a lot of money.

There’s money to be made, but be very wary right now! We’re reaching a tipping point that will decide whether the bear market will continue into the foreseeable future or whether the trend is about to reverse.

You’ll hear about it here first, regardless of which happens!

About the Author Will Salisbury

Will Salisbury is the co-founder of Blockchain Decrypted and full-time cryptocurrency trader. He also hosts the Blockchain Decrypted podcast, and when he's not talking or writing about blockchain technology and cryptos, he likes to play games and relax in his home state of Michigan.