Crypto Collapse?

If you’re way into crypto, you probably don’t care what crypto is trading at today because you know it will be way up tomorrow. This is the Cult of Crypto. For everyone else, what is going on with crypto?

Warning

I’m just spit balling here folks. Do NOT try and follow me when it comes to cryptocurrency. I’m new. I know nothing. Proceed at your own risk.

Analyzing Crypto

I’m not going to lie, I’m pretty new to crypto and I while I have some money invested in some different cryptocurrencies, it’s nothing compared to my overall investments. That being said, I’ve been researching, and I’ve seen some things. Let’s do this.

First off, crypto moves very much like other assets, including stocks. I don’t mean to say it moves the same as stocks, or even in relation to stocks, but if you looked a crypto price chart, the movements are very similar to what you would see for a chart of a stock like Apple, or the S&P 500, or other securities.

Since it moves like a stock, I wonder if it can be analyzed like one.

For many years there have been various theories that you can predict the movements of stocks or the stock markets by looking at their charts and detecting various patterns. If you look beyond the surface of this theory, you realize that this has nothing to do with the charts themselves and everything to do with how people react to certain kinds of price movements in their investments or prospective investments.

For example, one of the most basic forms of technical analysis is to watch the previous lows of a stock’s prices and see if the stock bounces off that level or continues below it. At a human level, you can imagine a chunk of people who remember XYZ hitting $33 before going up to $55. They might see $33 as a “cheap” price then and start buying if they believe in the stock. On the other hand, if people see the stock at $33 and won’t even buy then, then there isn’t enough support for the stock anymore at these prices.

Trade with Robinhood, Stash, Webull or Wealthfront?

The problem with technical analysis is that it makes no room for the real world. Let’s say that ‘ol XYZ stock is an oil company approaching $33 when one of its major refineries explodes in a terrible accident. The price will plunge right through $33, not because there was a head and shoulders pattern near a long-term floor, but because its refinery exploded.

But, crypto is not tied to anything. There is no oil refinery. There are no government sanctions. There is no CEO scandal. So, could its price movements actually be predicted by technical analysis since the only thing that affects the price of crypto is the thought processes, emotions, and computer programs of the masses?

There is a catch. Since crypto is kind of a new investment, and as such its population of holders is not as large or as diverse as other investments, there might be different patterns. Remember the Crypto Cult I talked about above? If they never sell, how does that affect our flags, and double tops, and cups and handles, and 200-day moving averages?

In the meantime, my Ethereum is down 46% and I’m tempted to draw some lines on its chart.

Crypto Collapse? 1
Sell at $3000? Buy at $2000? Next upwards test at $4,000? Such nice round numbers too…

About the Author

By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended for financial or investment advice. At the time of publication, Mr. Nelson owned several different cryptocurrencies including bitcoin, Ethereum, XRP, Shiba, and something called REN, however, that may change at any time without notice. This is not a recommendation to buy or sell securities, crypto, or anything else.

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