November 16, 2021
The First Correction in Quite Some Time
Well… What we warned of in the last couple of days has now materialized: The first decent correction in the crypto markets in many months is here. Indeed, BTC and ETH have broken their short-term uptrend structures and now find themselves caught between macro support and resistance. Is this only a shakeout before the next move up or has the bull market exhausted itself after all? Let’s look at what’s going on.
There is no reason to sugarcoat it: BTC's price chart does not look pretty right now, causing a lot of “double top” fears on Crypto Twitter.
After all, it is a simple calculation of supply vs. demand: If more people sell than buy, prices go down. While there are many reasons to believe that new money will enter the crypto space in the coming months and years, it will take some effort to grind through the sell volume of panic sellers and – especially – long-term holders who are taking profits.
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The good news is Bitcoin has (for now) successfully retested an important weekly support level and is bouncing right now.
Zooming out also helps to give some perspective on the current price action.
The (short-term) bad news is that “buy the dip calls” have been prevalent today and instead of “cleansing” the market from leverage, people jumped into leveraged longs to buy the dip. What can we deduce from that? Irrespective of whether you expect Bitcoin to hit $100k and more this year or to enter a bear market soon, short-term we should be prepared for some more leverage shakeouts and volatility.
Depending on your current positioning, risk profile, and conviction, there are different strategies to buy the dip, but most importantly: Don’t throw all your capital in at the first dip but instead be patient and ladder in your buys in increments.
What is the good that such market corrections bring? Firstly, they help cool down the overall exuberance and leverage in the markets (we’re not just there yet). Secondly, they normally have a soothing effect on Ethereum’s gas fees which in turn lays the basis for a renewed increase in activity and adoption (potentially good for NFTs…). The best analogy is probably a cold shower in a hot summer.
And of course, there is another significant benefit that negative price action brings… better memes. 🥲
If you are still feeling uneasy about today’s market action, here is some good perspective:
Meanwhile, in many regions of the world, crypto has been the best way for people to protect their money from being inflated away. Perspective is all that matters!