Bears Are Worried
Bulls in full force
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Last week’s price action for bitcoin was pretty remarkable. We haven’t seen this bullish price action in a while. We’ll dive into current price action today, and we’ll also make some more comparisons with the 2022 downtrend to examine if current price action is similar to that of the previous bear market. Bitcoin market structure is improving on multiple fronts, and we’ll look at whether those improvements are enough to switch the trend, which has been down for six months now.
The assumption from earlier letters was that bitcoin would reach the low $80s but that it would hit resistance and that it, probabilistically, would fail on its first attempt. If this rally were to fail, there should be signs of selling and profit-taking, and we’ll assess if we see that in the data or not. For the record, we’ll be glad if we don’t see those signs, but we are not holding back if we do see them.
Stoic
Before we dive into this week’s market breakdown, I just want to leave a personal note. I want to explain that when I write an analysis, it’s from a ‘stoic’ point of view. In the past, I have, too often, been very ecstatic when price was rallying and down when price was dumping. This caused me to make suboptimal decisions, to say the least. Everyone who has been in markets long enough knows that their best investments came from times when they longed the market with pain in their stomach because the chart looked absolutely horrible, and their worst investments came from when the chart was pointing to the sky and the market thought this would never end.
So when bitcoin’s price rises 26% in 40 days, the hodler in me backflips and pops bottles of champagne. But the stoic in me knows from experience that when that happens, often we’re at local highs.
In a great conversation between Jocko Willink and Andrew Huberman a few years ago, Jocko was telling Andrew about how to lead a team. He compared a team with a ‘mob.’ And a mob is very sensitive to the overall mood. An average individual won’t just throw bricks through windows when he’s angry. But in a mob, when one individual starts doing it, the atmosphere can turn around within minutes, and the most ordinary people can start acting out like hardcore hooligans.
Jocko tries to lead teams by keeping them grounded when they’re on a winning streak and improving morale when they’re on a losing streak. I find this very similar to markets and investing.
When I’m being defensive after a 25% rally, that’s not because I’m trying to defend a bearish stance; it’s because of the stoic approach. It’s about making rational decisions, which don’t have to be right all the time, but will help in the long run.
