By Kris Sayce, editor, Casey Daily Dispatch
Bitcoin has come back to life.
It’s been up as much as 45% from its low in July. And it’s followed a wider rally in crypto as well.
But is now a good time to buy bitcoin?
As you probably know, when bitcoin moves, it moves fast. So you don’t want to fall into the trap of missing a big move.
So today, we’ll look at bitcoin. Is now a good time to get involved?
Or is it better to wait for a potentially cheaper entry? We’ll explore this question below…
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts: Nick Giambruno and Dave Forest. And from the founder of our business, Doug Casey.
And from time to time, we incorporate the analysis of charting expert, Imre Gams. We’ll do that now, as we check in on his latest analysis of the bitcoin price action…
An Increasingly Important Asset
This isn’t the first time we’ve looked at bitcoin. It’s becoming an important investment asset.
After all, Wall Street players are getting involved. Companies are starting to add bitcoin to their balance sheets, such as Tesla, software firm MicroStrategy, and digital payments provider Square. Since August 2020, these three have invested a combined $4.4 billion into bitcoin.
Therefore, it deserves as much attention as any other asset.
But before we look at where it’s going next, let’s turn back to where technical analysis expert, Imre Gams, predicted it would go the last time we spoke to him.
In the June 29 edition of the Dispatch, Imre told us:
It’s likely that we are nearing a short-term bottom in bitcoin. Once this bottom is in place, there will be a flurry of buying… a tradeable move to the upside.
That’s how it played out.
Bitcoin confirmed that bottom just a few weeks later on July 20, when it fell below $30,000. It has since rallied as much as 45% to a high of $42,605.
What’s more, bitcoin is up around 470% since the start of 2020. That’s a big move – although bitcoin has seen bigger moves over the years.
Even so, when something moves that much that quickly, we figured it was a good time to get Imre’s take. We wanted to know if we should buy now, or if it’s better to wait.
But before we get to that, it’s important to remember a key technical concept.
Will Bitcoin Break Out Higher?
Here’s what Imre told us:
The foundation of technical analysis is the ability to identify market structure. In broad terms, that means knowing if a market is in an uptrend, downtrend, or moving sideways in a range.
At first glance, that may seem obvious. But there are so many chart patterns, it can be easy for a novice to confuse one pattern for another… or to focus on a short-term pattern without seeing a longer-term pattern, or vice versa.
As Imre explains:
This is an important skill to develop as a technical analyst. Identifying the underlying trend will determine what kind of trading or investing strategy you will use to take advantage of that specific market structure.
For example, it may be stating the obvious, but you shouldn’t normally buy in a bear market, at least not until you can determine a bottom is in place.
However, even in a bear market there may be countertrend buying opportunities.
What does Imre mean by a “counter-trend”? The following bitcoin price chart will help explain:
If you look specifically at the price action between the red lines, you can see the counter-trend. Until the big upward bounce, the price was trending downwards.
But within that downward trend, there were “counter-trends,” where the price gained – in several cases, quite significantly. These were tradeable moves. That includes the recent bounce.
Setting Up for a Big Move
So what can we learn from these moves? Back to Imre:
What this price action tells me is that bitcoin has yet to truly break out of its roughly $10,000 trading range. There are obviously sellers up at $40,000 and there are buyers below at $30,000.
This is a reasonable range, and it’s certainly wide enough to trade it for profit. A simple rangebound strategy would be to look to sell near the top of the range and to buy at the bottom.
That’s easy to do with the benefit of hindsight. But it’s not always easy in a live market.
Looking at the chart from a risk-reward perspective, it’s fair to say that bitcoin is trading at a key level.
If it can’t hold above $40,000, there could be another opportunity to buy bitcoin at much cheaper prices – perhaps as low as $30,000.
The next few days will be important for this price action. If you’re looking to invest for the first time in bitcoin, or to add more to an existing holding, get ready.
Like I said above, when bitcoin moves, it moves fast. We’ll continue to watch the action and keep you updated on where we see the price moving next.
Editor, Casey Daily Dispatch