We have been reading different forecasts on crypto social media, Facebook groups, crypto traders and we would like to explore if there is also completely the opposite scenario what most of the people believe.
This is probably one of the most controversial article I have ever written; some people may like it and some wont but we decided to express our point of view because almost nobody does it this way.
We got ready for this coming descending cryptocurrency trend in RFND when the founder Cryptovato1 has observed an important red candle last Saturday afternoon. That candle was the first warning that this may be coming. He strongly believed in that sign because he has observed similar sign before other market drops and he decided to sell most of his altcoins last Sunday whose value overpassed the cost of ETH gas fees.
Then you know what happened on Monday and Tuesday morning. Yesterday during the day there was a recovery however the market on Wednesday was playing undecisive sidegame. Last night Bitcoin together with ETH hit their bearish supports, and there is a very slow recovery today, the top coin that had bullish performance was Cardano during Friday morning.
When we read many comments in some Facebook groups, most of the people don’t allow to think that this a beginning of the red market and they are strongly convinced that this is only a correction and Bitcoin will moon soon around 100,000 dollars or perhaps more. If someone makes a statement of something different, he/she gets attacked immediately. We personally don’t like it, I think there shall be always a freedom to a free expression.
There is a strong argument of the size of Bitcoin waves, potential of the impulse of increase and a lot of people want to compare to the previous cycles such as in the year 2017, and they base their comparison and think we are in the middle of our way to the top.
However we have been doing other kind of analysis:
Not because of the fact that Bitcoin increased 20 times from its lows in 2017, it means that it has to repeat the same pattern in 2021. When Cryptovato1 was doing his financial analysis in one brokerage company, he remembered a lesson from his former boss that there are always higher percentual gains when the value is low. For example back then Bitcoin was 940 USD in March 2017 and increased over 20 times in 9 months.
But last year Bitcoin reached its low of around 5,000 USD after the stock market crash in March, and people think that we have to go the same way. The steady rise with 5 month sideway market between 8 – 11 K USD, from that point has been already for 11 months.
Another argument in favor of cryptocurrencies is continuous mass adoption of new key players, big firms, etc and gaining more acceptance in new countries all around the world.
There has been much more innovation, rise of Defi, interesting staking proposals, etc.
But have we considered also the downside of all of this:
Hype: you just read a tweet of an influencer or billionaire and you go and buy that Doge which had spectacular rise in January BTW.
Speculation: One company burns tokens next week, so we go there immediately and buy it without even considering how financially sustainable it is.
Gas Fees: We have read about ETH and ETH2.0 and nobody has solved this situation so far. So we may complain about a fiat but we have ended buying Erc-20 token of 50 USD worth with a debit card because it was lot cheaper than doing it using Ethereum network because we refused to pay 60 USD in fees, so fiat proved us this week to be more efficient to buy directly that ERC-20 token with Visa card rather than being exposed to these outrageous gas fees. Because of the cost of those fees, you cannot withdraw tokens without being affected from your wallet if the value is lower is lower than 10 USD because the impact of the gas fee would go between 10 - 70% depending on the gas fee of the moment. Some projects stopped payouts of crypto earnings because they aren't willing to pay for the ETH fees, therefore many small holders weren't selling their cryptos as well.
Even if they maybe profitable, they also pose a high risk for ETH itself because a lot of ERC-20 projects have already started to migrate to Binance, Polka Dot and Cardano Chain and other networks in search of lower fees. The same high ETH gas fees have made it difficult for many ERC-20 projects expansions and some of them started to raise more limits for withdrawal or suspended withdrawals of some token because of high cost of ERC-20 transactions.
Therefore the top 20 cryptocurrencies may be completely different in 1 or 2 years.
And on top of all of that we have clearly declared crypto enemies in many circles of power, I won’t tell who they are because you already know them.
And big attempts to declare crypto bans in many countries have occured (latest has been in Nigeria - the most important cryptocurrency market of Africa) and there is still a danger of a new wave of lawsuits and keep on going with mass persecution of cryptocurrency holders in many countries.
There have been a lot of upsides of current crypto market and we really proud of all you and all the token creators but we also have to consider all of these facts in order to stay down to earth, it’s like to see what is the best that can happen to me or what is the worst.
There is something called Elliot Wave in TA, which basically relies on a fact that the wave pattern is driven by the emotion, by excessive optimism or pessimism.
What happened after last Tuesday, I know that a lot of crypto enthusiasts still believe in moon and we don’t want to take away their enthusiasm. However after some people saw their losses in their wallets or exchanges, some of them freaked out and became much more cautious, and you can see it in comment on some Facebook groups. There will be always people with maximalist point of view, but there are as well people calling for basically get down to earth and watch what has been happening in the market. It may not end the wave of optimism but it also started a trend of becoming more cautious and not going after every hype in the market. People started to want to analyze more and base their trading decisions not only on hype or perhaps they wait or also speculate to buy a new dip.
There is one fact in bull market, it can be in the stock market, Forex or cryptocurrency market - every news – even a little rumor drives the value fast and quite efficiently. In the bear market, opposite happens; companies can have tons of innovation, new launches and people ignore it because they have more aversion towards risk. And we observed it already in 2 crypto projects – they brought a lot of innovation, and people ignored it this time, the price didn’t increase but it actually decreased; in the first project the price fell by 20% and in the second launch it went by 70% down in 1 day. That means the price depended much more on Bitcoin sell off rather than on the innovation of those projects.
It would have been totally different story if it happened last week during bull’s heat.
We don’t say that the long term bear market is going to happen, but we consider the possible to return of Bitcoin to the range between 15,000 – 35,000 USD in few weeks. Ethereum may go down to 400 - 900 USD. We don’t wanna scare you, we just allowed to ourselves to consider this dark scenario itself. Altcoins may lose between 40 – 90% of value in the following weeks. This prediction is very grim and we really hope that it won’t happen to this extent but as an investing firm we have to consider this scenario as a probability, and we assigned 33.33% to this probability.
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In every market prediction; even if you do your Technical Analysis and Fundamental Analysis the best you can go, there is always a considerable probability that the market will go against you. In Forex market that percentage can be between 20 -35%. In cryptocurrency market, we estimate it between 25 - 50% depending on skills of every crypto trader or holder.
However we like more the idea of short term bump. It would be much nicer for all of us. There are also a lot of strategies how to profit from bear market, so not everything is that bad. And there is nothing better than buying a cheaper cryptocurrency at the end of bear market.
What will we do in the following days?
We will remain on stable ground for few days and wait. If we don’t feel secure enough, we can wait, nothing happens if you have to wait few more days. Until we are convinced about a convenient entry point to buy some cryptocurrency we will definitely do it or if a bargain appears in front of us.
