Bitcoin Just Broke Down… (Our July 2024 Bitcoin Forecast)

Game of Trades

1 Jul 202405:52

Summary

TLDRThe video discusses Bitcoin's recent 20% corrections, a significant shift from its 2023 performance. Despite a promising setup in May, Bitcoin failed to break resistance and diverged from the S&P 500's all-time highs. The presenter closed their Bitcoin position, citing a broken technical posture and potential downside. They highlight the importance of risk management and compare current Bitcoin trends with past market behavior. The video also mentions a successful Salina trade, suggesting a potential for a similar bullish run as in 2021, while emphasizing strict risk management in crypto trades.

Takeaways

📉 Bitcoin has experienced two consecutive 20% corrections, indicating a significant shift in behavior compared to its performance in 2023 and early 2024.
📊 There is a potential for Bitcoin's price to move lower, with the recent price action possibly signaling a topping pattern.
🔄 The expectation in May was for Bitcoin to return to its price channel and resume its bull market, but it failed to break above resistance and diverged from the S&P 500's performance.
🚫 A trade initiated in May on Bitcoin was closed at the same level it was initiated due to a breakdown in technical posture and a stop loss triggered by the price channel.
🔎 Historical data shows that Bitcoin and the S&P 500 have been closely correlated, but there have been divergences in the past with varying outcomes.
💡 The possibility of a false breakdown or bear trap exists, as the S&P 500 is at all-time highs and Bitcoin could potentially catch up.
📈 Large Bitcoin holders have been selling, which is the opposite behavior observed towards the end of 2022, indicating a change in market sentiment.
📚 Capital.com's analysis of large Bitcoin holders' activities provides further insight into the current market dynamics.
💼 Risk management is crucial for successful trading, with principles such as initiating trades with a good risk-reward ratio and booking profits early.
🔄 Bitcoin is currently in a sideways trading range with no clear direction, and a bear trap scenario could occur if it tests the bottom of the price channel.
🌐 The active trade on Solana (SOL) is based on a key trend line and has shown a 10% increase since testing support, with a technical setup similar to a successful pattern from July 2021.
📉 Despite high volatility, strict risk management has resulted in small losses and large wins in crypto trades since the start of 2024.

Q & A

What significant change in Bitcoin's behavior has been observed since March of this year?
-Bitcoin has experienced two consecutive 20% corrections, indicating a shift in behavior compared to its performance throughout 2023 and the beginning of 2024.
What was the expectation for Bitcoin's price movement following its peak in March?
-The expectation was that Bitcoin would return to its price channel and potentially resume its bull market after its peak in March.
What was the trading strategy initiated in May based on the key moving averages and S&P 500 performance?
-A trade on Bitcoin was initiated when key moving averages pointed upwards, suggesting a strong trend, and the S&P 500 was surging to new all-time highs, offering the possibility for Bitcoin to catch up.
Why was half of the Bitcoin position closed, and what was the outcome of the remaining position?
-Half of the position was closed for a 10% profit when Bitcoin broke below a trend line. The rest of the position was closed at the initiation level after Bitcoin hit and closed below the price channel, resulting in no profit or loss.
What concerns arose from the breakdown of Bitcoin's technical posture?
-The breakdown raised concerns about the possibility of additional downside on Bitcoin in the short term, which the traders wanted to avoid risking to their clients.
What is a 'whipsaw' or 'false breakdown' in the context of trading?
-A 'whipsaw' or 'false breakdown' refers to a situation where the market moves in the opposite direction after a significant price movement, often misleading traders into making incorrect decisions.
What historical correlation exists between Bitcoin and the S&P 500, and how does it relate to the current situation?
-Bitcoin and the S&P 500 have been closely correlated, with strong divergences in January 2024 and 2023 eventually correcting as Bitcoin caught up to the S&P 500. The current situation could be similar, but there's also a risk of a bear trap.
What evidence suggests that large Bitcoin holders have been selling recently?
-Evidence from the last few months indicates that large Bitcoin holders have been selling, which contrasts with their behavior towards the end of 2022 when they were accumulating.
What are the key principles of risk management mentioned in the script, and how were they applied to the Bitcoin trade?
-The principles include initiating trades with a great risk-reward, booking profits early, not closing winning positions too early, and not letting winners turn into losers. These were applied by initiating the Bitcoin trade when risk was smaller than potential reward, booking profits early, and cutting exposure before heavy losses.
What is the current state of Bitcoin's price action, and what scenarios are being considered for future trading opportunities?
-Bitcoin is in a sideways trading range with no clear direction. One scenario is for it to test the bottom of the price channel before potentially catching up to the S&P 500, which could be a bear trap type of move.
What is the current active trade in the crypto space mentioned in the script, and what is its performance so far?
-The active trade is on Solana (SOL), initiated as it tested a key trend line defined by lows in 2023. Solana is already up 10% since testing this support and has a technical setup similar to a successful run in July 2021.
What has been the success rate of the crypto trades initiated since the start of 2024, and what strategy has contributed to this success?
-The success rate has been high, with all losses being small despite high volatility, and some winners being very large. A strict risk management strategy and being very picky with trades have contributed to this success.

Outlines

00:00

📉 Bitcoin's Topping Pattern and Divergence from S&P 500

The script discusses Bitcoin's recent performance, highlighting two significant 20% corrections since March of the current year, contrasting with its behavior in 2023 and early 2024. It suggests that Bitcoin's current price action might indicate the start of a downward trend, possibly forming a topping pattern. The video also revisits a previous analysis predicting a return to a bullish market after a peak in March. The script details a trade initiated in May, based on key moving averages and the S&P 500's surge, which unfortunately did not materialize as Bitcoin diverged from the stock market's performance. The trade was closed with a 10% profit when Bitcoin broke below a trend line, and the rest was closed at the initial trade level after hitting a stop loss. The script raises concerns about Bitcoin's technical posture and the potential for further downside, considering the divergence from the S&P 500, which has been at all-time highs. It also mentions historical correlations and divergences between Bitcoin and the stock market, as well as evidence of large Bitcoin holders selling in recent months, which is a shift from their behavior at the end of 2022.

05:02

📈 Solana's Bullish Trend and Risk Management in Crypto Trades

The second paragraph focuses on Solana's (SOL) current bullish trend, comparing its recent price action to a similar pattern from July 2021, which led to a significant price increase. The script describes an active trade initiated when Solana tested a key trend line, which has already resulted in a 10% gain. It emphasizes the importance of strict risk management in crypto trades, which has been a successful strategy for the clients involved, as evidenced by the trades closed since the beginning of 2024. These trades show small losses despite the high volatility in the crypto space, and some significant wins. The script also speculates on Solana's potential to reach $560 if it continues on its current path, mirroring its performance in 2021. It concludes by reiterating the importance of being selective and disciplined with crypto trades to ensure continued success.

Mindmap

Keywords

💡Bitcoin

Bitcoin is a decentralized digital currency that operates without a central bank or single administrator. It is the first and most well-known cryptocurrency, often used as a benchmark for the entire cryptocurrency market. In the video's context, Bitcoin's price action and behavior are central to the discussion, with the script mentioning its corrections, potential topping pattern, and correlation with the S&P 500.

💡Corrections

In financial markets, a correction refers to a decline of at least 10% from the recent peak of an asset's price. The script discusses two consecutive 20% corrections in Bitcoin's price, indicating a significant shift in investor sentiment and a potential change in the market trend.

💡Momentum

Momentum in trading refers to the rate of change of an asset's price over time, often used to predict future price movements based on the assumption that trends will continue. The script mentions Bitcoin beginning to lose momentum, suggesting a weakening of the bullish trend and a possible reversal.

💡Price Channel

A price channel is a technical analysis tool that consists of two parallel trendlines that form a corridor for an asset's price movements. In the script, the expectation was for Bitcoin to return to its price channel after peaking in March, indicating a potential resumption of its bull market.

💡Moving Averages

Moving averages are a widely used indicator in technical analysis that helps smooth out price data by creating a constantly updated average price. The script mentions key moving averages pointing upwards for Bitcoin, suggesting a strong upward trend during a specific period.

💡S&P 500

The S&P 500 is a stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States. It is often used as a benchmark for the overall U.S. stock market. The script discusses the S&P 500's surge to new all-time highs and its correlation with Bitcoin's price movements.

💡Divergence

Divergence in technical analysis refers to a situation where a security's price and an indicator move in opposite directions. The script notes a strong divergence between Bitcoin and the S&P 500, indicating that while the stock market was performing well, Bitcoin was not following suit.

💡Risk Management

Risk management in trading involves the identification, evaluation, and prioritization of risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. The script emphasizes the importance of risk management, mentioning the principles taught to clients and how they applied them to the Bitcoin trade.

💡Stop Loss

A stop loss is an order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a position. The script describes closing the Bitcoin position when the price broke below a trend line, hitting the stop loss, to avoid further losses.

💡Bear Trap

A bear trap is a false signal indicating that a security's price is going to fall further when, in fact, it is due to rebound. The script suggests the possibility of a bear trap with Bitcoin, where a breakdown could be followed by a price increase, contrary to expectations.

💡Salana

Salana, also known as SOL, is a cryptocurrency and the native token of the Solana blockchain platform. The script discusses an active trade on Salana, highlighting its technical setup and potential for a significant price increase, drawing parallels to its past performance in 2021.

Highlights

Bitcoin has experienced two consecutive 20% corrections since March, marking a significant shift in behavior.

A bearish price action on Bitcoin suggests a potential topping pattern and possible downward movement.

In May, a great setup for buying Bitcoin was observed with key moving averages pointing upwards and S&P 500 reaching new highs.

A trade on Bitcoin was initiated in May based on a strong trend and support level, but it failed to break resistance.

Half of the Bitcoin position was closed for a 10% profit when the price broke below a trend line.

The remaining Bitcoin position was closed at the initiation level after hitting a stop loss due to further price decline.

The technical posture for Bitcoin is concerning, with a broken trend line indicating potential for additional downside.

The possibility of a whipsaw or false breakdown in Bitcoin is considered, given its correlation with the S&P 500.

Large Bitcoin holders have been selling, contrasting with their behavior towards the end of 2022.

Risk management is emphasized as crucial for successful trading, including booking profits and avoiding heavy losses.

A sideways trading range for Bitcoin with no clear direction is observed, with a potential test of the price channel bottom.

Salana has an active trade with a 10% increase after testing a key trend line, showing a strong technical setup.

Salana's current price action resembles its successful run in July 2021, suggesting a potential for a similar bullish trend.

A strict risk management strategy is applied to trades, ensuring small losses and large wins for clients.

Cryptocurrency trades since the start of 2024 have shown small losses and large wins, demonstrating effective risk management.