My post on February 23rd indicated that Bitcoin can reach the $12,000 value area by March 2nd, 2018. While I might be off by about $700 bucks, we are well within the value range and date of that target. We can and should expect to see higher prices with scared money and amateur money coming back into the cryptocurrency asset class.

Scared Money, Weak Hands, New Traders

A stock chart is nothing more than a visual representation of the psychology of the participants. Technical Analysis gives us various styles and methods to look and analyze the markets. I believe it is very similar to my wife’s profession. My wife is a Psychologist, a PsyD. I married Yoda. But she’s way hotter. Anyway, my wife is a psychodynamic doctor/Psychologist. Her style of therapy is just one of many styles of therapy, one of the most common is probably CBT therapy (Cognitive Behavioral Therapy). Technical Analysis is the same way. And just like Psychology and the practice of therapy, technical analysis has some shared norms no matter what style you use. One of the norms of technical analysis is the presence of weak hands, scared money, and/or new traders. 

  1. New money is essential for market expansion. It is a necessary component. This is where new money comes in. It’s the FOMO (Fear Of Missing Out). New money buys at the highs, believing that the there is still time to get in and that the past buyers will certainly still be buyers at these levels. Experts and veteran traders are selling into these elevated levels to new traders.
  2. This is the most dangerous place for new money. A flush gets rid of the first set of weak hands. And then the most psychological damaging fake out begins with a fake rally to the upside, almost entirely fueled by new money and the worst emotion to have in trading: hope. Prices rise, fall and then finally the pain is too much. Weak hands abandon their positions.
  3. After enough exhaustion both in the percentage of moves and volume of participants, experts and veteran traders are buying here. Slowly accumulating, allowing for some paper losses, but still buying on the many dips. Eventually, an equilibrium is formed where all the veterans and experts have already gotten in on the lows and have facilitated the slow rise.
  4. The same people who got in at number 1 participate in here again and buy at the highs. Prices reverse, the scared money and weak hands don’t want to experience what they went through no number two. They’ve been hurt. The Scared and New Money that got hit hard back on number one and number two are looking to see if it’s safe to get back in. They want revenge. They want to recoup their losses. They’re jittery. But, collectively, they all begin to fuel a new rally towards higher prices.
  5. Prices will continue to rise and new money will continue to come in. All the while the experts and veterans get a free ride while the psychological effect of euphoria and positive sentiment fuel another ride to the top.

You’re not new money or scared money by participating now

If you don’t want to be a victim of the market, getting at prices at below $15,000 is where you want to be. Even if we get another bear leg down to $4,000 or even $500, you should be happy if prices get down that far. Anything below the $15,000 value area over the month of March should be considered a blessing. Capital continues to flow back into cryptocurrencies and should continue to grow as we get closer to Spring.