The purpose of this article is to explain how I personally invest in the Bitcoin and Ethereum space.
I refer to it as macro strategic investment as opposed to the term Hoddling which to me has come to represent financial loss and not taking profit
The term hoddling to me represents the holding of Bitcoin and not being cognizant of parabolic Bitcoin tops and huge bear bottoms (no pun intended).
I further note on social media today a fascination with day trading which I believe has led to many non-technically trained people finding out the hard way that trading the most volatile market in the world demands expertise in technical analysis ,it also demands emotional and psychological training and infers an emotional detachment from hard gained analytical strategies
As a yoga teacher, executive master master life coach and business person of 22 years I have come to understand that while I love being invested in the crypto space I also need to be cognizant of the fact that I need to lead a balanced and fulfilling life
With that in mind even though I have the technical tools I have decided not to day trade but rather to educate myself to a point Where I am aware of Bitcoin parabolic tops and 80% retractions and in so doing develop a plan for financial success.
I will break the article into three sections
The first section will describe the indicators I use that give me a warning that we are heading into overbought conditions against the general backdrop of a four-year cycle
The second section I will describe the indicators I use which when correlated give me a sell signal on Bitcoin. I say Bitcoin only as it has been my observation that Ethereum and the altcoin market can have a separate bull run post Bitcoin parabolic top so I’m specifically referencing Bitcoin when I refer to a parabolic top.
The third section addresses indicators I use to identify a Bitcoin bottom which I put to you is relatively easier to substantiate and identify versus a Bitcoin parabolic top as it is not as violent in nature.
In the geophysical sense I look upon this as a physical landscape in terms of high mountains and long low valleys.
I have been a lazy investor in Bitcoin for many years and adopted the hoddling approach of set and forget but after observing the Co Vid crash and the disbelief rally of June 2019 and after having experienced the greed and fear of 2017 I decided to treat my investment as a business and to actively educate myself to a point where I believe I understand the market to the best of my ability.
I will begin with the indicators I refer to quite simply as warnings
They are as follows
I subscribe to Glassnode and Sentiment websites and pay attention to the movement of the top 100 Bitcoin wallets. If towards the end of a four-year cycle I observe these wallets to move onto exchanges I am preparing myself mentally to get ready to sell.
The second thing I immediately do which you may find very simplistic from a technical point of view is that I will go to the Bitcoin logarithmic growth curves chart where the price has respected the top and bottom trend lines since Bitcoins inception Co Vid excepted .
I initially go this this idea from subscribing to Look into Bitcoin website
This is my personal chart, however.
I would look at the relative strength index and observe that it is greater than 80 on a weekly scale. I will look at the stochastics. I will look at the Mac D and other personalized charts I have access to.
I will reference the stock to flow model to see if the price is above the flat line on the current cycle
I will look to the MVRV_Z indicator on Look into Bitcoin website to see if the price has entered the red zone
I will look at the Puell Multiple on Look into Bitcoin for price to enter red zone
I will be cognizant of time and where are we in the four-year cycle of Bitcoin. I understand that Bitcoin may not observe the four-year cycle and can go longer or shorter, so it is important to have a plan ready to execute
I will be aware that in 2013 there were two parabolic advances and that if the first parabolic advance happens early in the cycle that I must be prepared to take partial profit. I will use the Pi cycle top indicator from Look into Bitcoin website for this purpose along with RSI. 20 WMA is a good re entry point if this happens in my opinion.
I will look to see if the Bitcoin price is in the red zone on the Bitcoin investor tool on Look into Bitcoin website also.
Bitcoin Investor Tool.
I will make sure that the Bollinger bands on a weekly scale have absolutely been stretched to a maximum and the candles are looking to potentially move outside of the upper band
Lastly, I will go onto Twitter and I will look for signs of huge excitement
I will also check the centralised media to see if retail is being encouraged to buy.
The best example of this to my memory was the advice given by certain American television station to buy Ripple at around $3 in the last altcoin bull run.
This to me is a contrarian indicator to sell
For we must remember that to be a successful investor you should always be a contrarian to the crowd, and you need to sell greed and you need to buy fear.
For me personally as I get close to a Bitcoin parabolic top, I will meditate every morning. I will attempt to slow my breathing down so that I am in the best psychological state to execute a strategic investment plan without paying any heed to my emotions at all
Unfortunately for me this means not having multiple coffees which can knee jerk a sell order!
This is especially important to people who have a personality I would describe as being kinaesthetic.
It is so much easier if you are an unemotional analytical person and I mean that with great respect
I will now move on to the indicators which I use to identify a Bitcoin parabolic top.
Before I list those indicators, I would say to you that I do not nor never would have 100% of my assets still on my hard wallet within the last week of such a run.
I would be feathering out my position on an exchange as we approach or an OTC desk.
Bitcoin daily log growth curves top of trend line log scale, Look into Bitcoin website however I also use my own personal chart, see below.
The best indicator for tops I know that I know is the PI cycle top indicator (below) as shown on Look into Bitcoin website where you will observe the fact that it has identified nearly all of bitcoins parabolic movements to within three days including two macro movements in the 2013 bull run
I love this indicator and would recommend it to all investors.
Once I see the above 2 indicators in an area where it says sell then I am paying close attention to the relative strength index to show me a bear divergence on the daily
I am making sure that the Bitcoin investor tool is in red I am making sure that the MVRV Z is in red from the LIB website along with Puell multiple
The last week of a Bitcoin top can sometimes demonstrate a 50 to 30% increase in price within a short space of time with huge candles breaking up to and outside the Bollinger bands
Again, in geophysical terms I think of it as being right up there on the top of Mount Everest looking down over Kangshung face with a 4000 metre drop below. It is scary but it is the place where if you have a plan times starts to slow, and you make good choices.
It will be characterized by a blow-off top which is an extremely long wick on a daily candle signalling buyer exhaustion.
Psychologically I must prepare myself that I may have left some money on table. I describe this as the “hip pocket nerve “syndrome otherwise known as greed. Its not a pretty emotion.
When all these things correlate, I am ringing the OTC desk, I am on the exchange and I am selling the remainder of my position.
It is at this time of course that if you are technically trained you might consider putting a very small percentile of your profit onto a derivatives exchange with a good stop loss setting a solid short for what could be a 12 month to 18 month contraction in price.
One of the first things that I do if I have been successful in my investment strategy and I have cashed out is to get a rough understanding through the Cointracking or Ledger Live app of what my profits are. In my case I am subject to capital gains tax which is 30% in Australia or 50% less if you hold the asset for more than 12 months. I will put that money aside rather than reinvest and speculate that money so that I know it is there at the appropriate time.
Too often in the space I have read of people reinvesting their profits into other assets only to see those assets drop in value, yet they still have a tax liability hanging over their head.
In the lead up to the Bitcoin parabolic top I am watching the Ethereum price and some of the leading Altcoins. I am looking at them to give me an indication that they have room to run post Bitcoin parabolic top.
If that is the case, I will assign some of my capital as a spot buys into Ethereum and larger alt caps.
I will stay no more than two to three weeks within the altcoin market and again come out to cash watching for RSI bear divergence on the daily timeframe.
So, if a contraction of price in the bear market is to follow my only involvement during this time would be to have a short position on Ethereum and Bitcoin and that is it.
I will have a meeting with my accountant to make sure everything is in order so that I can sleep at night. And I will psychologically reward myself by making sure that my loved ones all benefit in some way from my success.
I find it it’s very important to reward yourself for hard work and professional execution of strategic investment as this creates a feel-good mood for having worked so hard during the Bitcoin bear market in developing a plan that you have brought to fruition by sticking to fundamental and what many of you may view as simplistic analytical tools
Like Newton and the Apple sometimes the answers in life are right there in front of us but we choose to ignore them in favour of something more flashy !
I now come to a Bitcoin bear bottom
Bear market bottom.
Relatively speaking it is far easier to identify a Bitcoin bottom trend line.
in many cases I will use some of the tools mentioned above in a contrarian manner
The first thing I look for is what the big money is doing
Who am I to question smart money?
I will again reference the top 100 Bitcoin wallets to see whether they are buying
I would look for the 200-week moving average
I will look for Bitcoin to exhibit a Wyckoff accumulation pattern
I will be aware of time and Bitcoin cycles and international economic triggers.
A possible ascending triangle
A possible Adam and Eve pattern
I will look for Bitcoin to touch the bottom of the log growth curve trend line as in first photo.
I will again reference the Puell multiple to see whether it is in the Green Zone
I will again reference the MVRV Z to see whether it is in the Green Zone
I will look at the hash ribbon indicator
I will look at the Woo bull difficulty ribbon
I will briefly look at the Mayer multiple
And then more specifically I would look for a daily relative strength index bullish divergence.
I will observe sentiment in the markets, And I will look for comments such as Bitcoin is going to 0!
I will observe during my morning meditation my own state of mind in terms of the emotions that I am feeling
And I will again separate my emotion from my reading of the analytical tools mentioned above
I will go back and refine my plan and look for any mistakes made and update my plan for the next three to four years
I will remind myself that I am to buy fear
I will remind myself that I am a contrarian investor