How to pick the start of a crypto bear market

Dear reader and fellow crypto enthusiast!

Today I will share with you a great question I got yesterday from one of my Telegram Group followers:

“At what point would we consider the bear market is starting? Under 39k?”

One issue I find with a lot of investor and trader is that they want to have one answer that fits all. However the answer changes when based on the time frame you use.

You can’t have one that fits all, as for example your investment strategy would be massively different based on the length of time you invest in. An investor with a time frame of 5 years would buy and sell in a completely different manner then one that has a time frame of months. Same with traders, your time frame will define your strategy before anything else.

Like Gold or properties, on a long term perspective it has been in a bull market for a long time, from a short perspective it has moved in between bull, bear, and bull many times.

Technically speaking, a bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.

The idea of the bear market is creating lower highs and lower lows and have the daily below the 200MA. (We did not pass the 200MA on the daily). These are some of the characteristics of a bear market.

However many times bitcoin has created a pattern that seemed to indicate that we were in a bear market like in September 2013 when it dropped by over 40% and then doing 8X.

So for me to answer that question I have to look at the macro phases of the market, as I explain to my students. The reason why many of my predictions have been quite correct, is because of the hybrid system I use, where I look at bigger phases/cycles and work with supports, resistance, trend etc… and let the price action tell me it’s story, not market projections, expectations and hopes.

So to go back to the question, the market could go down to $35K and on a weekly time frame and still be in a bullish trend. Why because we still would not pass the 200MA. But on another side of the coin this would create lower lows and a drop bigger than 20%. This for many would be a mixed signal. So that’s why I base myself on the price action, supports/resistance and trends.

This forms a clear indication, a truthful mirror of the action of buyers and sellers.

For those that think my approach is not that good… I would argue that it is consistently making profits in both a bear and bull micro and macro cycles. So it does not need to be liked or be validated by others, what matters is that it is making money!

So the answer depends if you look at the tree or the forest. Small time frame or bigger time frame. Bigger time frame it’s still bullish, lower time frame, at the time of this writing (15-September 2021) is still bearish to neutral.

Keep in mind that there are cycles within cycles, phases within phases. So you could have a massive bull runs (uptrends) in a macro bear cycle (this is called a bull trap) and have a massive bear runs (downtrends) in a macro bull cycle (this is called a bear trap).

So once again it’s not a black and white answer. For me it helps not to try to label, box, and limit the market. I let the market do its thing and adjust my trading and investment strategy to what the market is showing me.

So I need to wait for the market to pass below some major levels of support to stop being cautiously bullish and reconsider my stand. For now the market is giving in my opinion mixed signals, so I need to wait.

The fact that we moved in the new Fibonacci level, and we created a nice big green candle indicates that maybe the double bottom we had, could be the end of this specific downtrend, but we need to wait. For now momentum is on the upside, trend is moving up and buyers are re-gaining control.

To become more bullish, and believe there is a real chance to move above the $64K level and beyond, we need also to pass another indicator, the HMA. The fact that the 104HMA has worked as resistance at the $53K level is a bit of a worry, so we will need to observe, learn and be adaptable to what the market is telling us.

We all need to become market observers, market listeners and market whisperers!

So learn to adapt, know that not everything in life is black and white and can be easily boxed and labeled. This flexibility and active caution can really help you have a resilience and preparedness that most traders and investors don’t have.

For now be well, be safe, be strong, be patient

Much light

Paolo