Should You Buy The Dip In Bitcoin And Other Cryptos?

Should You Buy The Dip In Bitcoin And Other Cryptos?

2022-01-15 | Selina Mathew

Should You Buy The Dip In Bitcoin And Other Cryptos?

On Friday, Bitcoin challenged and rebounded off earlier support levels at $40,000, which it had previously tested. It continued to rise on Monday, finishing over Friday's high, and then rose once more on Tuesday, finishing over Monday's high. It might also indicate that the selloff that started in early November and brought the monarch of cryptocurrencies tumbling 43 percent in only two months has ended.

Bitcoin's unpredictability is just what made it such an appealing trading instrument. CME "micro" bitcoin futures contracts, with a contract size of 1/10th of a Bitcoin, are tiny sufficiently to enable our clients to establish strategic long holdings with manageable negative hazards. In an August blog article, we launched micro-bitcoin futures as well as stated that we'll be watching the market.

Bitcoin on the Basis of Faith

Bitcoin is viewed as a substitute currency by certain investors. We think it's much too unpredictable for that. Would you put your faith in a currency that may drop 43 per cent in only two months? Others consider it solely as a store of value, similar to gold. This frame of perspective is more practical. Bitcoin has outperformed gold, silver, as well as every other fiat money on the earth. It has a small (12-year) track history, but it is hardly anything less than spectacular. What is the source of bitcoin's worth? Belief. In the end, things are only valued by what individuals feel they are valued. It makes little difference whether they are equities, legal tender money, or bits of computer code known as "bitcoin."

 BTC

BTC/USD 1 DAY PRICE CHART: SOURCE - COINMARKETCAP.COM

Consider any monetary transaction. It may happen solely if both sides accept that the paper bills being exchanged are good enough to justify the sum inscribed on them. Contemporary money is not guaranteed by gold, silver, or some other fixed asset excluding the government issuing it's "sincerity as well as reputation." The sole element that renders a $100 note value $100 is the widespread perception that it is value $100. Presently, there are sufficient individuals who trust in bitcoin that each coin is valued about $44,000.

Bitcoin is based on greed and fear.

Despite other "hard" products such as soybeans, gold, as well as crude oil, Bitcoin's availability is determined by its algorithm. There will not over 21 million bitcoins mined. The algorithm increases the difficulty of mining each fresh currency. With supply fixed as well as demand dependent solely on perception, of this market would be strictly "technical." This is merely a sophisticated method of stating "based on charts." Price charts depict the evolution of the two major human feelings that underpin all marketplaces: fear as well as greed.

Front-month micro bitcoin futures ended at $43,825 per bitcoin on Wednesday. Its concluding contract value was $4,382.50 since its contract size is one-tenth of a bitcoin. The massive down movement that started in November came to a standstill at around $40,000, which was the same support level as the previous downward movement in September. In May as well as June, the level of market assistance was $30,000 per month. That level was also maintained.

Does this imply that $40,000 will have a similar effect? No, not always. The amount of dread that is causing the recent drop is lower. Lower fear levels might be allowing the re-emergence of avarice or even anxiety of a bullish kind, such as FOMO. Bitcoin is also severely oversold as well as susceptible to corrective rebounds.

What Should I Do Presently?

Our clients should contemplate purchasing February CME micro bitcoin futures for not over $45,000, with the expectation that bitcoin will reach our upside goals of $52,000 as well as $60,000 in the front-month futures contract. Because we do not intend to employ stop-loss options, we propose having to put up 100% of the contract value - $4,500 per contract if completed at $45,000 - to prevent a margin call. The price action at $52,000 will decide if we depart at that level or wait for $60,000. Each of these objectives are built on the Fibonacci sequence.

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