In my newsletters, you may have noted my propensity to draw parallels between Bitcoin and NASDAQ. This comparison, I believe, is rooted in a tangible connection that links their respective performance. Often this correlation is direct and synchronous, yet sometimes it operates like a rhythm or a dance — one leads, the other follows, especially on a macro scale.
Reflecting on the patterns I've observed, the current landscape echoes the characteristics of the previous two major market corrections — the post-2018 and the post-Covid downturns. In these instances, we witnessed stocks first catapulting into a parabolic growth phase. Once this momentum began to level out and stocks started moving sideways, Bitcoin sprang into action.
Doesn't this sequence of events make a lot of sense? When you consider Bitcoin and crypto as a whole, they are undeniably riskier assets compared to even the most volatile of stocks.
Consequently, when investors identify stocks at attractive prices, significantly distanced from their All-Time High (ATH), they tend to allocate their funds there first, viewing it as a near risk-free investment. Then, as risk in the stock market escalates, they transition their capital into the crypto sphere.
This movement of funds is a historical trend we've seen play out on a macro level. Of course, it's essential to remember that history doesn't always repeat itself, and markets can be unpredictable. However, by applying a combination of human psychology and risk management principles, we can better understand these market dynamics and their potential implications. Bitcoin vs NASDAQ chart
Taking this into account, we must remember not to rely solely on our theoretical frameworks. It is crucial to utilize our indicators to assess Bitcoin's strength and continually monitor the vitality of the bullish trend. We addressed this matter in our previous newsletter, identifying several bullish trend indicators for Bitcoin on a weekly basis. Since then, we have seen a confirmation of 'take profits' signals, indicative of some weakening in the trend, although the overall trend remains active.
Should Bitcoin start trading below the 25K mark on a weekly basis, the trend could flip bearish.
In light of this information, craft a strategy that aligns with your trading style and risk tolerance. It's essential always to keep the broader perspective in view — zoom out. This will aid in quelling any fears and mitigating any current biases you may harbor. In trading as in life, context is everything. PS: Don't forget to join our telegram, we have been sharing tons of very profitable stocks plays meanwhile!
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