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3 Major Catalysts for Cryptocurrencies in 2018 – Time to Buy Now?

Since the highs in December 2017, Bitcoin and most cryptocurrencies have seen a sharp decline, and agile traders/investors have mostly exited to await better buying opportunities. This includes myself, and after cashing out my profits in early 2018 (after the double top reversal), I have been waiting for the past few months for a timely opportunity to get back into the market.

Despite the volatility, I am still optimistic for the long-term potential of Blockchain and Cryptocurrencies, hence it is important to know which catalysts will likely move the prices for 2018, and when is the optimal time to get into the market.

1. Increased Regulation

At first glance, this might seem like a bad thing, as many countries around the world (China, Australia, Taiwan, Philippines, US, etc) start to clamp down on Crypto-related activities, or impose some kind of restrictions and controls. And prices reacted to such news of regulation negatively as expected, with a prolonged downtrend lasting several months.

However, what most people don’t realise is that such regulation is actually a good thing in the long run, and necessary for Cryptocurrencies to become more “mainstream” and widely adopted. Which means that while we can expected prices to fall, it is also a good catalyst to enable us to buy these assets at lower prices in the future. Timing is key.

2. Institutional Funds

Once their is sufficient regulation and prices are low enough, institutional investors (hedge funds, asset managers, etc) are likely to come into the market. This is where the big moves are going to come from, as we saw from the dotcom boom. And recently, we have heard some news/rumours that big names like George Soros, Rothschild, Rockefeller, etc are starting to come into the market.

If we look at the graph below, we can see that a major trend is usually driven by institutional investors, which means that despite the meteoric rise of Cryptocurrencies over the past few months, it is still nowhere near a bubble, since the “real big money” from institutional investors have not started to pour in yet.

Imagine a future where fund managers and pension funds all include Cryptocurrencies as one of the asset classes in their portfolios, together with stocks, bonds, gold, etc. This will definitely create a huge demand for it, and push up prices faster than we have ever seen.


3. Scale & adoption

One major debate is whether Bitcoin (and other cryptocurrencies) can serve its purpose as a global currency with a stable store of value, and cheap & fast transactions. Currently, it is not there yet, and how fast it can get there will depend on how well the product can be improved. The volatility will naturally decrease over time as the market cap increases, but the speed and cost of transactions will depend on innovations and improvements from developers.

Is it a Good Time to Buy Now?

Personally, I have starting accumulating it for the past week or so, as evinced by the recent charts I have been posting. Looking at the chart below, we can see that prices have corrected from $19k+ to around $7k, where there is strong support, forming a potential double bottom.

And if the regulation starts to tone down and more institutional investors start coming it, this will be a pretty good confluence of factors to expect a further increase in prices.

 

I will be happy to continue accumulating as prices and fundamentals continue to improve. Stay tuned! 😀

 

Follow-up on Bitcoin Short: When is A Good Time to Buy? (Bonus: ETH Analysis)

In my last blog post here, I called for Bitcoin to drop from its current $13k+ to between $8k and $10k, using the measurements of the swing counts.

Now, the price of Bitcoin has fallen below $10k, but I am not planning to catch a falling knife, so I will wait for the fall to end and the dust to settle, before entering the “post dot-com landscape) and buying up coins for cheap.

One of my readers also suggest an analysis for ETH, and I have posted the analysis here inside the “Live Trading Network”, which you can gain lifetime free access with just one click.

Thanks, see you soon!

Chart of the Day: Detailed Bitcoin Analysis

Based on the latest chart of Bitcoin, it looks like it is undergoing a major correction.

After hitting highs of almost $20k, it has started to form a corrective pattern between $12k and $17k, and there could be more to come.

After the first initial move down (the blue sell arrow) which was mentioned in our previous blog post, there was a corrective a-b-c wave, which could be a corrective wave within a larger corrective wave, with the 2 pink rectangles being wave a and wave c respectively.

If that is the case, the end of wave c will be around $9k, which is quite close to where the old trendline is.

Lastly, we also pulled out a Fibonacci Retracement on the whole price history of Bitcoin, and drew in a red rectangle to indicate the 50-61.8% retracement range. For major corrections, this is where it usually ends. If it breaks below the red rectangle, then it becomes a reversal instead of a correction. The red rectangle is between $7.5k and $10k.

For conservative long-term investor, you can wait to accumulate inside the red rectangle.

However, if price goes above point c (around $17k), then it would invalidate the pattern, and the uptrend would likely continue to surpass $20k, so I am prepared to buy on a break above $17k as well.

Cryptocurrencies & The 50-Year Kondratiev Wave Cycle

About 2 weeks ago, I attended a talk by one of my former professors (SMU), and it was on the topic on cryptocurrencies and the upcoming technological disruption. She mentioned about Kondratiev waves and the 50-year cycles, and I went on to do some research on how Cryptocurrencies fit into this wave, and how long it is likely to last according to this model.

“In economics, Kondratiev waves (also called supercyclesgreat surgeslong wavesK-waves or the long economic cycle) are hypothesized cycle-like phenomena in the modern world economy. It is stated that the period of a wave ranges from forty to sixty years, the cycles consist of alternating intervals between high sectoral growth and intervals of relatively slow growth.” – Wikipedia

 

After the global financial crisis in 2008, the market bottomed in 2009, and since then we saw the start of a new major cycle, which could last till 2050/60. This means that we are still in the early stages (fast growth stage) of a big long-term trend. This trend consists of not just cryptocurrencies, but also things like blockchain, AI, VR/AR, machine learning, etc.

 

Will it Crash Like the Dot Com Bubble?

In every phase of innovation, it will start off with radical innovation, where a new technology is introduced. This will be a period of experimentation and flux, as many new products come into the market. Cryptocurrencies are currently in this stage, which is why prices are so volatile.

As you might be aware, there are 3 main types of coins: currency, platform, and applications. Some people also include a 4th type called privacy coins, like Monero and Zcash, which are meant to allow completely anonymous transactions. Some examples of currency coins include Bitcoin, Litecoin & Bitcoin Cash, and their main purpose is to serve as a virtual currency. However, Bitcoin behaves more like an asset rather than a currency now, since people are buying it for capital appreciation rather than to use it for transactions. Platform coins refer to ones like Ethereum, which do not directly provide a function to the consumer, but allow applications to be built on their platform. Lastly, applications are like the iphone apps, which serves a particular function for the end user.

After the market has gone on long enough to enter the bubble stage, the next phase of innovation is the “shake out” phase, where the market gets rid of “useless” or bloated/weak products. This will typically be the part associated with a market crash, but it is also possible that the bubble deflates slowly instead of bursting.

In an early stage boom, the application coins will tend to proliferate, and there will be a lot of them. This means that this class of coins would be the most risky to invest in, because a lot of them will be the first to die out when the market crashes.

 

 

After the dust settles, the ones who survive will likely become the dominant players (Facebook, apple, Amazon), and it is worth noting that the best products/technology may not necessarily be the ones that survive, rather it is the one with the widest adoption. Do keep this in mind when building your Crypto portfolio and deciding which coins to invest and hold for the long-term.

After the crash, the trend may take a while to resume, but it will be more majestic than before. The next phase involves incremental innovations, where products are further refined, such as improvements in the products, or new applications for existing products, etc.

So Should I Buy Now?

Although we know we are at the early stages of a mega-trend, we also have to keep in mind the “shake out” phase which has not occurred yet.

If you are willing to hold through that and capture the subsequent big upside, then you will not need to worry so much about timing the market now. But if you prefer to take a more cautious approach, you can wait till the “shake out” is over before entering the market.

And lastly, if you prefer the best of both worlds, you can use swing trading to capture the short/medium-term moves in the market, while waiting for the “shake out”, and then going all-in when the dust settles. Whichever approach you choose, just make sure you don’t miss out on this 50-year wave, because it is literally once in a lifetime. 😀