Bitcoin Bloodbath Coming to an End?

Matthew Carr By Matthew Carr
Emerging Trends Strategist

Market Trends

I came of age as an investor in an era defined by some of the most epic market crashes in history.

Looking at a historical chart of the S&P 500, we can see the great scars from collapses of the past…

During those times, the drops seemed even more severe and terrifying.

And it’s that fear that stays with investors for years and years. No matter how positive the momentum and environment have become.

This was how I learned one of the most important lessons of my career: Volatility is your ally, not your enemy.

There may be down days, down weeks, down months and even down years. But ultimately the market heads in only one direction – up.

Volatility is the greatest wealth generator there is because it means there’s opportunity to snag assets on the cheap. You just need to fight back the fear and be brave enough to act.

Of course, my love of volatility is why I’m a fan of the cryptocurrency markets…

Crypto Bloodbath

There are few assets that have had as horrific a year as cryptocurrencies.

It’s as though an artery has been severed and no tourniquet can stop the bleeding.

After a year of grabbing headlines and setting record highs, bitcoin has fallen more than 55% in 2018, according to Coindesk…

But, as we’ve so often seen, where bitcoin goes, so goes the rest of the cryptocurrency universe. For other cryptos, the injuries have been far more severe.

Ethereum has lost 65% of its value year to date. And it’s down 81% from its highs set on January 14…

Litecoin has tumbled 77% this year… bitcoin cash is down 80% so far this year… and ripple has collapsed, falling 92% since January 4…

What’s more, the combined market cap of all cryptos has been eviscerated, dwindling from a high of $828.3 billion on January 7 to a mere $193.1 billion by August 14…

The entire asset class lost more than 76.7% of its value in a little over eight months.

Nearly a whopping $600 billion!

At the same time, the market’s bitcoin dominance rate has soared. That’s the percentage of crypto’s total market cap made up by its largest currency.

On August 11, the bitcoin dominance rate topped 50% for the first time since December 19, 2017. It has continued to tick higher since, now accounting for more than 53% of the total market.

It’s an ocean of blood out there.

Meanwhile, traders like me are seeing signs that the carnage may be over.

A Nearly $3,000 Bounce?

On August 14, bitcoin fell to its lowest level in nearly three months.

More importantly, it dipped below the psychological barrier of $6,000…

Now all eyes are on the key resistance level of $6,675. If bitcoin can pierce through this level, the sell-off that began in July will officially be dead. That could pave the way for a new bull to run – possibly above $7,500.

Though the last time bitcoin bounced off these lows, it went to $8,500.

So even if you’re not a believer in bitcoin or other cryptocurrencies for the long haul, there are still short-term gains in the thousands ready to be had.

As is the case with options trading, investing in bitcoin and cryptos isn’t for everyone. You must be able to spot opportunity where so many others are paralyzed by fear.

The market is still nascent and grappling with growing pains. But few assets have the potential to deliver enormous gains – and losses – in such a short period of time.

This could be one of those eras where the gash seems so deep and disfiguring up close. But when we look back years later, we realize it was only a nick.

Good investing,

Matthew