Despite market optimism I still don't think we bottomed 📉🤔

The sentiment in the crypto markets has shifted and with positive news all around an increasing number of people are declaring that we have bottomed out at $5800. I'm still not convinced that is the case, and while we are certainly looking bullish in the short term I remain bearish in the medium term.

Positive news

After months of negativity recently there has been a surge in positive news regarding cryptocurrency. Whether it's the announcements of new ETF initiatives, or the positive reports by governmental organizations such as the G20, the American SEC, the EU Parliament or China re-entering the fray, to well-known figures in the space like Mike Novogratz flat-out calling the bottom, good news seems to be easy to find these days.

It doesn't end there by a long-shot. Bitcoin futures are up almost 100%, then there's Coinbase creating a political action lobby group, and stock exchanges looking to add crypto tokens to their platforms. There's just so much good news that it's getting to be too much to even list it all.

It's easy to feel the FOMO.

An optimist would call me a pessimist

I've often written about my crypto-PTSD that I have incurred after the 2014 crash and subsequent bear market, and I admit that I am of the more pessimistic kind of investors out there. I don't think we have hit the true bottom yet. It's just that I have been through such a market cycle before and it feels to me like we're going to go through one major dead cat bounce, in order to truly break everyone's spirits and shake the last remaining people out of the market.

Let me pull up the 2014 bubble & crash charts again.

The one thing I'm still waiting on is that big hump on the chart which I outlined with the circle where we break the downtrend, then make another attempt at a bull-run which fails at about 50% of the all-time-high. If you look closely at the chart, you will see some similarities to today's Bitcoin chart. Most notably the apparant 'bottom' and the apparant breaking of the down-trend.

Let me pull up the current chart for comparison.

There are some differences in the chart but the overall shapes seem comparable. As you can see, I have drawn out a pathway which I estimate that Bitcoin's price chart may follow in this current short-term bull market. If we take the previous bubble chart as an indicator, the 'hump' we may be going through will reach up to about the last lower-high from the previous down-trend. In 2014 this was $750, or almost double the then-assumed bottom at $350.

If we apply those numbers roughly to the current chart of Bitcoin that would bring the top of the upcoming bull attempt at about $10K. After failing to break 10K, if we follow the same path as 2014, we could slowly dwindle back down to about 50% of the previously assumed bottom - which would put the true bottom at about $3000.

If this plays out it probably won't be a quick process, just like last time. Back in 2014 the dead cat bounce took about 3 months, starting at the end of May and ending at the beginning of September. Right now we are in July, which puts us a little bit off in terms of timing but it could indicate a bounce all the way up until October-November before it starts to break down.

The Psychology

People talk about charts and market cycles, but what the charts really display are market psychology. The price is merely the result of that psychology. So when you're predicting the market, you're actually in a way predicting psychological human behaviour. A market cycle therefore isn't so much a cycle in price, but rather a cycle in investor psychology. It's not for nothing that we are all too familiar with the (in)famous 'market psychology bubble chart', of which many analysts will tell you we have passed the 'capitulation' and 'despair' phases.

I don't think we've felt true desparation at all yet. Today's despair is nothing like the hunger-winter of last time. Sure, we've felt 'fear', I'll grant you that. But true capitulation is the moment when it turns out that what appeared to be the next bull-run, is actually a failure, and the last chance for everybody to get out before it all turns to hell.

Despair is what happens when Bitcoin is dead. Capitulation is what happens because Bitcoin has failed. How does it fail? By going on a bull-run right now, and getting everybody's hopes up only to massively disappoint and slowly but surely utterly drain every market participant of their energy and enthusiasm. It will be the last and final slow but steady shake-out of all fortune-seekers from the market. All of this has happened before, and all of this will happen again. *

_{*At least, I think it might, but I couldn't make the BSG reference if I nuanced it!}

False optimism

I think the positive sentiment is a matter of false hope too. At least, in the short term. A lot of the positive sentiment is currently fueled by the possibility of proper regulations or the entrance of institutional money into the space, and while these are amazing developments I also realize that these things take a lot of time. Even in the most positive scenario where ETF's are granted the go-ahead and governments regulate positively these things are not going to happen overnight. Institutions and lawmakers are notorious for moving slowly and despite positive advancements it could very well take another year before we actually get anywhere.

Tone

And lastly when you dig through the amateur predictions and predictions of those who have only been in the space for a relatively short amount of time, you will eventually come across Tone Vays and his Bitcoin price predictions. I disagree on many things with Tone Vays, and don't particularly like him very much, but when it comes to the price of Bitcoin there are few with as much experience under their belt.

Tone Vays is one of the most well known, respected and controversial Bitcoin price analysts. He too predicts the price of Bitcoin to turn bullish in the short term, bearish in the medium term and bullish in the long term. This echoes my own feelings and predictions regarding the current market.

Don't get me wrong - I want the price of Bitcoin to go up. I would love to be wrong. I don't want to go through desparation and capitulation at all. But I can't ignore the signs and my gut feeling on this. I daresay that anyone who thinks we have seen despair in the current market, probably hasn't been through the last crypto-winter.

I would be more positive if we had dropped below $5800 on this last dip. That would have indicated to me that we're on our way down to the true bottom. Now that we're going up again, I can only hope that it'll be over as soon as possible so we can actually start to bottom out. From the looks of it, it might even take as long as the better part of another year before we reach the true bottom - again, based on the previous bear market. That's when the real veteran HODLers are made.

Should we manage to break above $10K I may start to reconsider my analysis, but I won't be truly bullish on this run until we break $12K.