It can be easy to get emotional when looking at the day to day fluctuations of stock. These emotions are often amplified for those who trade cryptocurrencies. That is why I believe a widely under-used tool is monthly charts. Most traders like to drill down to lower timeframes like the hourly, fifteen-minute, and even five-minute charts. However, I've found an occasional look at a monthly chart to be a great way to tune out the noise and get a sense of what is going on from a larger, long-term perspective.
When I pulled up a monthly chart of Bitcoin the other day, one thought immediately struck my mind: Bitcoin looks extremely similar to the way it was acting in 2016. Let's take a look at Bitcoin's current action to see how it compares to the 2016-2017 uptrend.
After topping in late 2013, Bitcoin fell into a large bear market. It then started to rally in the fall of 2015 but then moved in a sideways fashion in early 2016. When we look at the current chart, we can see quite similar action. After topping in 2021, Bitcoin was in a deep bear market in 2022. Now, it is moving sideways after rallying off its' lows.
We can get an even longer-term view by looking at yearly and quarterly charts. Here we can get a simple sense of how Bitcoin runs up and then pulls back for a period of time before resuming a major uptrend.
Coming back to the monthly chart, another important clue that caught my eye is that there has been a total lack of distribution coming into Bitcoin over the last few months. This is evident when we look at the monthly chart. The low volume throughout 2023 really stands out as it indicates that those who want to sell large quantities of Bitcoin have already done so. This was most likely done in 2022 as capitulation took place after the FTX debacle. Likewise, we saw a decrease in volume in the first half of 2016 before Bitcoin started to move higher. All of this bodes well for those who own Bitcoin or are bullish on Bitcoin. But what also intrigues me is that no one seems to care! Everyone was talking about Bitcoin in May 2021, but where are those people now? I've even seen a few people post extremely condescending contents on crypto and Bitcoin recently which is a sign that sentiment is still bearish. Just like the masses were ignoring crypto in 2016, the majority of people currently have no interest in trading Bitcoin. But if history does repeat itself, that will all change in the coming twenty-four months.
Risk right. Sit tight.
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Full Disclosure: I currently own Bitcoin and Ethereum.
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