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Sunday, October 24, 2021

You won't like this one BITCOIN

You won't like this one BITCOIN

BTC/USD COINBASE:BTCUSD

For the die hard crypto fanatics; you won't like this idea one bit. This is coming from someone who was Bullish from 2011, so don't shoot it down without giving it a read either.

You might have seen the film: Wall street, money never sleeps?

Well, in this film Gekko shows a chart on the wall of his apartment;

snapshot

This chart shows the Tulip Mania curve, it was insane - below, I have taken the story from Investopedia (word for word) and below each section I will edit it ever so slightly...

First - here's a little background.

What Was the Dutch Tulip Bulb Market Bubble?
The Dutch tulip bulb market bubble, also known as 'tulipmania' was one of the most famous market bubbles and crashes of all time. It occurred in Holland during the early to mid-1600s when speculation drove the value of tulip bulbs to extremes. At the height of the market, the rarest tulip bulbs traded for as much as six times the average person's annual salary.

Today, the tulipmania serves as a parable for the pitfalls that excessive greed and speculation can lead to.
Here's the chart up close;
snapshot

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History of the Dutch Tulip Bulb Market’s Bubble
Tulips first appeared in Europe in the 16th century, arriving via the spice trading routes that lent a sense of exoticism to these imported flowers that looked like no other flower native to the continent. It is no surprise then that tulips became a luxury item destined for the gardens of the affluent: according to The Library of Economics and Liberty, "it was deemed a proof of bad taste in any man of fortune to be without a collection of tulips."

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The first ₿itcoin appeared on the internet circa 2009; becoming a luxury item to own, a symbol of hope and freedom. it seem to mirror the quote exactly "a proof of bad taste in any man of fortune to be without a ₿itcoin wallet".

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Following the affluent, the merchant middle classes of Dutch society (which did not exist in such developed form elsewhere in Europe at the time) sought to emulate their wealthier neighbors and, too, demanded tulips. Initially, it was a status item that was purchased for the very reason that it was expensive.

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The middle class want affluence and wealth and see Crypto as a way to make money the easy way - thus driving up price, of such a status item.

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Cycles
The market moves in cycles which can be broken down into waves, this can then be forecasted using tools such as Fibonacci to predict price in the future.

In Elliott wave principle; You have cycles that fit into time. While exact time spans may vary, the customary order of degrees is reflected in the following sequence:

Grand supercycle: multi-century
Supercycle: multi-decade (about 40–70 years)
Cycle: one year to several years, or even several decades under an Elliott Extension
Primary: a few months to two years
Intermediate: weeks to months
Minor: weeks
Minute: days
Minuette: hours
Subminuette: minutes

So we would have to count the current move as a Cycle on the current count and a primary cycle inside of that (Monthly & weekly in essence) as in theory we are still inside a 1 move of anything larger.

This is the current (perceived count);
snapshot

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Back to the Tulips

According to Smithsonian Magazine, the Dutch learned that tulips could grow from seeds or buds that grew on the mother bulb. A bulb that grew from seed would take seven to 12 years before flowering, but a bulb itself could flower the very next year. So-called "broken bulbs" were a type of tulip with a striped, multicolored pattern rather than a single solid color that evolved from a mosaic virus strain. This variation was a catalyst causing a growing demand for rare, “broken bulb” tulips which is what ultimately led to the high market price.

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According to some technical guys, ₿itcoin can be mined and with enough equipment 1 full coin can flower over a year - due to the halving, which causes an increase in demand. It is driven to high market prices.

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In 1634, tulipmania swept through Holland. The Library of Economics and Liberty writes, "The rage among the Dutch to possess was so great that the ordinary industry of the country was neglected, and the population, even to its lowest dregs, embarked in the tulip trade.

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In 2021 ₿itcoin swept the world reaching as far as El Salvador. The rage amongst the Tweeter crowd was so great that, every man and his dog neglected common sense and even with stimulus money being used to embark on the ₿itcoin ladder.

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At this point; you probably hate this! I understand, majority of people only want opinions that mirror their own beliefs - trust me, I'm Bullish overall, I want a buy n hold strategy, but I cannot ignore factors out of my control. Regulation, Government stupidity and the world melting.

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Some simple logic.

Back in March I posted simple roadmap;
Bitcoin Roadmap - Elliott Monthly

Inside the post (click the image above) you will see exact co-ordinates for the move and the current situation. See below;
snapshot

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So where next and why?
If we are seeing a monthly 3 being formed (cycle phase) then we will go into another decline. Collecting new found liquidity at the high.
snapshot

And this making larger cycle 1 when it hits the 5th of this current cycle.
snapshot

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Some more on Tulips
A single bulb could be worth as much as 4,000 or even 5,500 florins—since the 1630s florins were gold coins of uncertain weight and quality it is hard to make an accurate estimation of today's value in dollars, but Mackay does give us some points of reference: among other things, 4 tuns of beer cost 32 florins. That's around 1,008 gallons of beer, or 65 kegs of beer. A keg of Coors Light costs around $90, and so 4 tuns of beer ≈ $4,850 and 1 florin ≈ $150.4 That means that the best of tulips cost upwards of $750,000 in today's money (but with many bulbs trading in the $50,000 - $150,000 range). By 1636, the demand for the tulip trade was so large that regular marts for their sale were established on the Stock Exchange of Amsterdam, in Rotterdam, Haarlem, and other towns.

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A single ₿itcoin could be worth as much as $67,000 which is hard to make an accurate estimation as it could be as little as $8,200 if you buy on Binance (and you have fast reflexes) Depending on where you drink beer, depends on how you can compare this. In Norway you can pay upward of $9, whereas In Antananarivo you can buy a beer for 6 cent.

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It was at that time that professional traders ("stock jobbers") got in on the action, and everybody appeared to be making money simply by possessing some of these rare bulbs. Indeed, it seemed at the time that the price could only go up; that "the passion for tulips would last forever." People began buying tulips with leverage, using margined derivatives contracts to buy more than they could afford. But as quickly as it began, confidence was dashed. By the end of the year 1637, prices began to fall and never looked back.

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At the time ETF's become available, it seems like the price can only go up. This Bull run will last forever, people start using leverage to buy ₿itcoin. Then - maybe a correction sets in.

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Never happen I hear you say; I often get asked about Plan B and the model - which of course makes some sense. But people are only reading the words and not seeing the chart;
snapshot

Firstly, what happens when you see yellow dots? we go orange, yellow - boom.

Ok and then secondary to that; look at the line straight across until mid 2024 >

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Play this move out - another I posted in March this year, the logic was there for what I would regard as a weekly 3-4 move up for 5 giving a monthly 3. As per the Elliott post above in the roadmap.

Bitcoin - They blew up the rocket?

Here's the outcome;
snapshot

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Tulip conclusions;
A large part of this rapid decline was driven by the fact that people had purchased bulbs on credit, hoping to repay their loans when they sold their bulbs for a profit. But once prices started their decline, holders were forced to liquidate—to sell their bulbs at any price and to declare bankruptcy in the process. Smithsonian Magazine indeed notes that "hundreds who, a few months previously had begun to doubt that there was such a thing as poverty in the land suddenly found themselves the possessors of a few bulbs, which nobody would buy," even at prices one-fourth of what they paid. By 1638, tulip bulb prices had returned to from whence they came.

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A large part of what will be seen as a shock horror, will be people thinking they have diamond hands until the wife finds out they have over leveraged a position that might not come back for (2 years) - unable to pay back loans on money borrowed to buy crypto. No poverty in the world, is of course the dream.

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The Bubble Bursts
By the end of 1637, the bubble had burst. Buyers announced they could not pay the high price previously agreed upon for bulbs and the market fell apart. While it was not a devastating occurrence for the nation's economy, it did undermine social expectations. The event destroyed relationships built on trust and people's willingness and ability to pay.

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Prior to 2024; people announced they could not afford to hold such positions and the game mostly passed to the wealthy who could buy when the blood is running in the streets. This destroying the trust and belief, re-affirming the "rich get richer and the poor, get REKT"

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Bullish or Bearish - I hope you enjoyed it.

I've been lucky, planted my bulbs and waiting for the to flower. If the price comes back right I'll add to the position.

Just be careful, use proper risk management and don't just buy the hype. Do some research for your own entries.


Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.

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