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Sure, they’ll report a 20% rally or decline – if it’s an investment that lots of people are already talking about. But without chartwork, that number is totally out of context: useless.
It’s a shame. Because chart patterns and indicators can not only reveal what’s going on now… but also point you to what’s next.
After all, when you plot out a price chart, you’re really tracking investor psychology. The cycles of fear and greed.
And when it comes to psychology, well, humans have behaved much the same since our earliest ancestors were scratching patterns and pictures onto cave walls.
People rush into decisions when their emotions get triggered.
If you’re in the financial media, you can tap into these emotions to get people to read your story.
If you’re an investor, you can be one of the herd yourself… or you can look for the cycles of market psychology – see how they map out on a chart – and use your findings to set objective price targets in your portfolio.
And some of the best charts to use are actually found in the cryptocurrency markets.
Think about it: Crypto prices move on pure speculation. Cryptocurrency has only been around for less than 15 years, with widespread adoption picking up much more recently than that. Blockchain technology is still very much under development as to the actual products and services being built there.
And when an asset class is “speculative,” investor psychology drives pretty much all the price action.
But don’t take our word for it. Look at what’s happened with Bitcoin (BTC) this past month.
Bitcoin was suddenly shoved into the spotlight in mid-March. Bank failures had people pondering alternatives to the dollar… and also forced the Federal Reserve to cool it with the interest rate hikes – inspiring Wall Street to reach for “risk assets,” including crypto.
If that was the first time you looked at Bitcoin in a while, it might have seemed sudden when BTC surged back to $28,000, then $30,000, price levels we haven’t seen for nearly a year.
In our crypto communities like Crypto Advantage Society, however, we knew that Bitcoin had been building up to this for a while.
Way back in January, BTC knocked down the first domino: its 200-day moving average (MA).
“In simple terms, this shows us the average price level over the last 200 days – you can see it represented by the blue line,” Senior Crypto Analyst Joe Shew explained in that month’s issue.
In bear markets, we remain under the 200-day MA for a time. “Time and again in bull markets, we overshoot the 200-day MA line and go on a massive bull run… Next stop: $25,000,” i.e., the 200-week moving average, Joe predicted in January.
The rest was history. Bitcoin retook $25,000 four weeks later, confirming that we were in a “strong, 2019-style rally,” as Joe put it.
Already the parallels were so clear when you overlaid the 2019 price action in BTC with its current chart, as Joe did for his subscribers.
In 2019 as well as 2023, Bitcoin was following “exactly the Wyckoff accumulation model,” Joe explained in one update in late March.
According to this pattern – which was discovered in the 1930s, and is commonly used in stock analysis – Bitcoin had just moved into what Richard Wyckoff termed “Phase E.”
Based on this Wyckoff pattern and its precedent in 2019, Joe told his subscribers on March 30 that he expected BTC to make a “strong movement out” from the price at the time, $28,000, before “consolidat[ing] around that $30,000 to $32,000 region.” Then he predicted that BTC would “move up potentially to that low $40,000 region” by the end of 2023 before experiencing “a pullback to test the low $30,000 region again.”
Bitcoin checked that first box – retaking $30,000 – 11 days later.
If you’re still skeptical about the rest of these price predictions playing out, well, see how closely BTC has followed that Wyckoff pattern so far, on its one-year chart:
Apparently, our behavior really hasn’t changed in 100 years – and probably for much longer than that. As the saying goes: History may not repeat, but it does rhyme. And as investors, we can use that to help us navigate even the trickiest markets.