Bitcoin’s Pendulum Turns

Fig. 1

There is no fortune made in a day, and no ruin in a day. Both are the product of system, or of the want of it. I have watched the great tides of trade for the better part of twenty years, and I have never known a man to grow rich by guessing. He grows rich by knowing his business, keeping his books, and holding his course when the crowd has lost its head.

So, to the matter at hand — the ledger of the present hour.

The first weekly candle has closed above the fifty-week moving average. For me, that is enough to begin. In the two advances that went before, once price had gained that line it held it, and did not let it go until the summit was reached. Whether this cycle will do the same, no man can promise. I can only say that the same machinery is at work.

Two things would confirm the change of weather, and I want both before I speak of an advance with certainty:

• A weekly close forming a higher high above $83,840 — an MSB (Market Structure Break)
• The fifty-week average turning upward — it is yet pointing down

Both are required. Until they appear, no honest man may call the uptrend confirmed.

The Pendulum

Some years ago I came upon this article written by Inmortal. He likens the market to a pendulum, swinging between bull and bear and back again. I have found no more elegant way of putting it, and I have used it since as the frame for all my reckoning.

Take the pendulum as your frame, and the question becomes plain: where on the arc does price stand today? To answer, I set down the marks I look for. There is no prophecy in them — only a surveyor’s stakes:

First, get your bearings. Price has peaked and is making a series of lower highs; that line of lower highs is the downtrend, the dashed diagonal on fig 1.

We know the direction of the swing. Now cast your gaze to the tipping point, the place of seller exhaustion — the bottom.

To buy the exact bottom is a gambler’s game, and the market punishes gamblers with a fine hand. Better to look for the signs that belong to a bottom, and be content with them.

Signal 1 shows maximum sell pressure; signal 4 shows the seller exhausted. In the last two downtrends both arrived in the same neighbourhood as signals 2 and 3.

Let me be plain: signals 1, 3 and 4 need never appear at all. They are markers on a map, and “The map is not the territory”. The market changes, and times change with it — but under a black sky they are a welcome light.

Signal 2, however, must appear. No advance begins until the downtrend is broken. That is a law of the works, not a matter of opinion.

The Tipping Point

A word to the reader: it was here that I increased my exposure to Bitcoin, having seen signals 1 through 4. I have studied this chart for more than ten years, and I can carry a little further decline without flinching.

Yet the tipping point was far from certain. A bottom cannot be confirmed until price has travelled away from it, and many a sober man will want that assurance before he acts. There is no shame in it.

The weeks following gave signals 5 and 6. One may call them early advance signals; I prefer to call them bottom confirmed, for they carry more weight seen in company with signals 2, 3 and 4.

Now a fuller picture of the tip of the swing appears. Put cycle bottoms out of your mind, purge the bearish view, and look to the signs of a new market.

Spring Has Come

That brings us to today, and the first genuine advance signal: a weekly close above the fifty-week moving average — signal 8.

Signal 7, the golden cross of the fifty and two hundred day moving averages, has already been noted. Daily matters carry less weight, but it is welcome all the same — further evidence of where we stand on the arc.

The cautious man may prefer to wait for signal 9 — a weekly close above $83,840, which would fix a higher high and break the bearish structure. Or for signal 10, a weekly higher low, somewhere between $59,000 and today’s $86,500.

Such signals bring in new capital — disciplined men who buy only when their system tells them to buy. Let them come. Every market needs its steady customers.

The risk in waiting for the higher low is the same risk as waiting for the bottom: the same pendulum, the same mechanics. Bitcoin has a habit of leaving men standing on the platform.

What Comes Next

We observe. We look for signals 9, 10 and 11 to confirm, and we hope for the chance to add at prices below today’s — with the confidence that these signals together have drawn a clear picture: the pendulum is swinging upward.

I will close as I have spoken all my life.

The man who follows a system is never at the mercy of the market. He may be wrong. He will not be lost.