Bitcoin Update – What’s Happening?

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1 May 2024

Cause & Effect
Two days ago, I published an article addressing the possibility of a strong correction for Bitcoin. Well, today we have seen Bitcoin fall as low as $56K, and BTC is currently trading in the $57K zone at the time of writing. BTC lost the support of the bull flag formation I made reference to in the above-mentioned article. Once this support was lost, it was a relatively quick trip down to $56K.

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I know many investors have chosen to adopt a view that positions Bitcoin ETFs in a position of absolute power, regarding further price action. Yes, ETFs have made a significant impact on the market, and are likely to do so in the long term. However, no single entity, product, or dynamic has the power to remove typical market dynamics. As I have alluded to before, market makers, for one, cannot survive in a one-sided market for long.
This is the nature of leveraged products. There is an enormous conflict of interest that exists within the world of futures and leveraged products. If you are unaware of this dynamic, chances are your trading account isn’t… you just haven’t been able to make the connection. Furthermore, there has been a fair amount of outflows from ETFs of late. This is perhaps where many investors are missing another crucial key behind the recent price action.
ETF investors are not like you and me. Their objectives are different. They are typically your average TradFi investor. Stocks, indexes, and other ETF products. In other words, they have entered the Bitcoin space directly as a result of BlackRock. They trust big names, and they trust “licensed” products. Unfortunately, the average psychology of such an investor is indifferent to a Bitcoiner.
A Bitcoiner, or Crypto enthusiast has lost trust in conventional financial products. They see Crypto as an exit, not a parking spot. In other words, a point of no return, or as little as possible. Conventional investors are familiar with a return rate of 5% to 15% per year, and so what do you think is the knee-jerk reaction of such an investor when they experience 50% in a couple of months?
My previous article also referenced the recent regulatory pressures that have once again arisen. Regular readers will be aware that I mentioned a resurrection of intensity in this regard at a later and more opportune time. That time is now! Eventually, enough negative forces compound, and ultimately force the market to retreat. This is how financial markets work. Excessive bullish overtones can only achieve the following:

Limit the extent of the downside
Shorten the time frame of bearish price action

Outside extremely peculiar circumstances, traditional market dynamics prevail. Even BTC has its own type of “traditional” behavior. Choosing to ignore this reality is how investors get caught at the top of a bull market, and why they start repurchasing at the commencement of a bear market, as opposed to more mature points later on in the bearish cycle. Once again, retail lives up to the stats:

Approximately 80% to 90% of retail traders lose money consistently.

The unemotional consumption of data, as well as the application of emotional intelligence are crucial practices in the life of an effective trader or investor. It’s not something you get to do half heartedly. It’s like a heart surgeon choosing to take up the knife to see if he will be any good at it. No, the only way he gets to enter the surgery is after many years of dedication.
That’s the nature of the game, and in many ways, trading operates on similar principles and dynamics when it comes to dedication and the acquisition of knowledge, skill, and effective execution. Regarding BTC we could see a local bottom between $55K and $56k. The support at $52K is relatively strong and well established. However, I would rather we saw a bounce before that level.
I am hopeful BTC will bottom in the $50K zone. I wouldn’t like to see that level being broken. It’s also a very psychological level. However, it’s too early to say. The price action needs to mature and play out a little longer before we can begin further assessment. At this stage of the correction, it’s still very much a healthy correction. How things progress from here will, of course, tell a lot.
Final Thoughts
When you are involved in this game, you have to keep a clear head. That’s why those unfamiliar with the behavior of financial markets should simply stick to dollar-cost averaging small amounts over time, and revisit their portfolios in years to come. That is, of course, my own opinion. That’s it for this one. Keep a cool head and I will see you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.