The conversation around Bitcoin (CCC:BTC-USD) is often a lively one even among friends. The whole concept is still somewhat foreign to most people, which makes it inflammatory to a degree. It is in our nature to ignore what we don’t understand.
It may have been the term cryptocurrency that threw people off originally. Bitcoin is not a currency nor does it need to be. We invest in gold even though it hasn’t served as tender in ages.
My goal today is not to convince readers of crypto viability. Instead I want to share an opportunity to trade BTC-USD this month as a stock.
Just like any stock, crypto coins have charts that give us clues. And just like with stocks, the data in the charts is actual investor actions. The Wall Street adage of “price is truth” also applies here. The lines on the BTC chart are actual data points of past history. There is potentially a giant opportunity brewing and investors should be ready to pounce.
This week, the indices are fighting to remain in the hands of the bulls. There are selloff programs trying to unfold. The bulls remain in charge but the fight is now closer than in a long while. The same is happening in crypto, as BTC is teetering just above a must-hold zone. Losing could open a sizeable trap door where would lie the opportunity.
The Stock-like Opportunity Brewing
The first mega-spike in BTC-USD to $19,600 in 2017 ended in a fiery crash. It lost 80% of its value and it took it more than a year to stabilize. Then in April of 2019 the crypto bulls mounted an impressive 230% rally. However, it fell a few thousands short of the high. Then the pandemic hit and at those lows, BTC-USD had almost reverted to the 2019 lows. The critics called it dead, but it came roaring back and crushed it.
From the $3,850 march 2020 lows, Bitcoin rallied 1,500% almost non-stop. The bulls barely stutter-stepped for two weeks before punching through the old high. At its peak BTC was 3.5 times bigger than the 2017 high that experts thought was a ceiling. Clearly, demand outstripped supply and the frenzy was on.
Bitcoin is about 39% below its highs and is at an important spot. Technically, there could be a disaster looming but one that investors can use. Luckily and even though it is not a stock, BTC still charts like one. You can see evidence of that in the chart around October 2020. Once they cleared past prior fail at $12,600, they broke out in a monster rally. Whether it’s a self-fulfilling prophecy or not, I don’t really care — as long as it works.
The Bitcoin Trade Setup
Now the opposite scenario is potentially setting itself up this month. The BTC-USD price action is concentrating around holding support. If the bulls for whatever reason slip, the bears will bum-rush them lower. BTC could fall into a sizeable tailspin as a result.
So you see that I am not emotional about the price action. A perma-bull wouldn’t even write about a bearish setup publicly. I am merely seeking profit opportunities wherever they present themselves. Crypto trading has so far been stress-free except for a few platform hiccups from growing pains.
If Bitcoin fails to hold support near $39,500, it would be at risk from falling precipitously. The move will surprise most onlookers just as much as it did in 2020. Because it has fans, I expect they put up solid efforts to hold several lines of support. It’s important to acknowledge that there is no actual trigger yet for that scenario until it starts. Only if the support fails that the setup could unfold. The thing to do now is ready the accounts for the trade.
In a tailspin, I bet there would be buyers near $33,000 and $29,000. The bottom may lurking in the low $20,000 maybe even the old 2017 high. But they don’t ring bells, so I won’t go all in at once. I would suggest that smart investors average into full-size positions. This has been the best way to trade gold for decades, to build a position over time.
Overcome the Skepticism
High-profile billionaires not trusting Bitcoin should not keep you from learning about it.
I don’t understand how these financial brainiacs could intimate that it’s a bad holder of value. They choose to ignore the fact that it has appreciated more than anything else for over a decade.
Whatever the asset is, if it’s rare, legal and it has millions of fans, I’d trade it for profit. Besides, we all need to learn the concept of digital assets because that’s where the world is going.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.