Summary: In a previous blog we covered our quick take on what would happen to bitcoin post $48,000 breakout failure, here’s the follow up.
Bitcoin is currently ranging, but based on history, we expect prices to fall up to 60% long-term – maybe even as low as $20,000. This makes for a solid market for traders, but less so for long-term investors.
Using a tool called the “supertrend indicator”, you can begin to see long-term patterns that repeat across time and asset classes. Historically, after all-time highs, BTC tends to eventually fall back to the bottom level of this indicator.
In this guide, we’ll explain the supertrend indicator, how it works, and why it shows that long-term investors should be patient, but traders shouldn’t hold back from getting in on the action.
The supertrend indicator is a simple, reliable indicator of long-term price trends. And even though BTC is currently ping-ponging in a range in the 40s, historical indications point to a steady decline. We can’t be sure when, but hear us out.
Time and again Bitcoin, Ethereum, and even “regular” stocks follow this simple and reliable indicator. So even though we can’t be sure exactly when, we do know that Bitcoin did this exact same thing back in 2017, and based on all the data we’re seeing, it’s likely to do the exact same again.
That means that, for now at least, trading is a much safer and more lucrative strategy than long-term investing for the time being.
Quick Advice: Trade Instead of Long-Term Investing - Bitcoin Could Lose Up to 70% Again
Historical indicators point to another plunge, maybe even as much as 40-70%. And if BTC loses 50% of its value or more, many alt coins are likely to lose 99% of their value – so be careful.
Of course, alts losing a ton of value is just another chance for you to load up your bag again (more on that in our next entry).
Back to BTC…
Short term indicators are currently painting a mixed picture, but long-term indicators strongly point to Bitcoin eventually finding a new bottom, possibly losing more than half its value.
If BTC fails to break through the 48,000 – 54,000 range, it could plunge all the way down to the bottom of ~20,000 (we’ll cover why in a moment). $48,000 is your key trigger for considering Bitcoin to make any fresh highs.
If it does break out of 48k, we’ll likely see 54k and up to 61k after, before falling back down to key resistance levels below its current price.
Either way, hold off investing. Trading is still 100% fine, if not encouraged. There’s a ton of opportunity to make gains when BTC is ping-ponging in a range.
Don’t worry, we’ll explain why.
What is the SuperTrend Indicator?
The supertrend indicator is a very simple, accurate, and reliable tool that clearly depicts the distinction between uptrends and downtrends.
Basically, it’s a way of finding support and resistance levels that’s a good predictor of which way the market is heading over longer periods of time.
So even when it looks like BTC is ranging in the short-term, long-term it’s a reliable way of seeing if it’s moving up or down.
When you tune it in a certain way, you can find these historic patterns across asset classes, both cryptocurrencies and more traditional assets. And when you can find these patterns, you can better predict what the market is going to do over long periods of time.
Here’s what it would look like on a chart:
If you take a closer look, you’ll see that in this very strong downtrend, prices continue to hit these key support lines before bouncing back. The main benefit here is that you don’t have to play guessing games with prices.
Instead of thinking “hmm, where is this price going to go?”, you can draw these lines and at the very least have a solidly reliable idea of where it’s going to go.
OK, Cool. So What Does This Mean for me, And Why Should I Not Invest Long-Term in BTC?
Bitcoin is hovering in the $40,000 area after a failed attempt to break $46,000. And it’s recently posted 250% gains since its previous all-time high. We all want it to break through and crack $100,000, but remember, nothing ever goes up in a straight line forever.
Is it possible for BTC to turn around, rocket past $60,000, and smash through $70,000 and beyond?
Yes, it’s possible.
But if history is any indicator, then it’s a solid no. It’s much more likely that Bitcoin continues this long-term downtrend toward the bottom. Remember, this is in a high-time frame. Currently, it’s ranging within that expected long-term downtrend.
In the past, new highs were created before sharp reversals testing bottom support. Remember the bloodbath of 2017? Bitcoin hit an all-time high of $20,000 before crashing to $3,000…not once but TWICE before new all-time highs were reached. We’re very likely in the midst of a similar trend.
You don’t have to take our word for this. It’s literally what BTC and ETH have done before. Even Tesla stocks have behaved the exact same way.
Let’s jump in the ProfitFarmers time machine and head back to 2017.
The Last Bitcoin Crash: 2017 - 2018
Remember when BTC hit a previous all-time high of $20,000 back in December 2017?
Eventually, it went all the way down to $3,000 by 2018.
This chart depicts the rise and crash of Bitcoin at that time. Let’s take another look at it.
If you look closely, you’ll see the price was dumping to certain lines on this chart and holding for a while before declining further. Those are the supertrend levels.
NOTE: Supertrend levels are dynamic, not static. They rise and fall with the price action.
Like we said before, during the last long-term downtrend, Bitcoin dropped to every supertrend level before bouncing back up, re-testing key resistance, and then breaking back down again. This pattern continued all the way down into the $3,000 – $4,000 range.
See why this is important? After BTC pumped to hit an all-time high, the trend reversed all the way down to the supertrend bottom of 6.5 before bouncing back yet again. Levels 5.5 and 6.5 are key. This is usually where the trends reverse and the new pump begins.
Why is that important? Because if you know where to draw level 6.5, you’ll have a very probable indicator of where the price could eventually go (but nothing is ever definite).
Keep in mind it wasn’t a free fall. It was a clear downtrend over a longer period of time, but still kept bouncing back and forth.
This isn’t the only example. Let’s take a look at Ethereum’s previous supertrend behavior.
Ethereum Supertrend 2017 - 2020
Notice that it goes from a peak of around $1,400 down to a bottom around $100, only to reverse and steadily climb back once again according to long-term supertrend levels.
So, on the way down, ETH tested supertrend levels before bouncing back, testing, and breaking down.
On the way up, it behaved more or less the same. Imagine being able to accurately predict price action this way. It’s a major weapon for your tool bag.
The cool thing is that we even see this behavior outside of crypto as well. Here’s an example of Tesla stock.
Tesla Supertrend - 2013-2016
During this megamove over 3 years, Tesla’s stock surged up and consistently tested the bottom before bouncing back up.
The numbers themselves aren’t that important – it’s the principle. Look at the following charts. In the one above, the price creeps up before testing the bottom. Next, a megamove.
Here’s the second attempt:
Even after posting a new high, it eventually falls back to the supertrend 6.5.
And again here…
And one last time…
There it is again. The price hits the “local” bottom (supertrend 6.5) and bounces back. Just like we thought it would.
Tesla proves that the size of the trend doesn’t matter. Prices will attempt to find the local bottom and bounce back so long as the general trend continues.
NOTE: Obviously Bitcoin and Tesla can’t be compared as assets, but the technical analysis is strongly correlated.
Aside from Bitcoin, Tesla is one of the few entities that attained a trillion dollar market cap from complete scratch in a few short years.
Conclusion - It’s Trading Season so Hold Off on Buying the Dips
Supertrends are a real, proven indicator of support and resistance levels. And history has shown that prices tend to find the local bottom before bouncing back up and hitting all-time highs.
If you tune things the right way, you can find these historical patterns across asset classes and get unparalleled insight into how prices are likely to behave.
Right now, Bitcoin is in the middle of a downtrend after reaching an all-time high in late 2021, meaning that all signs are pointing towards it plunging down and finding a bottom rather than rocketing up and breaking through to $70,000 and beyond.
Nothing is ever certain, but if BTC keeps hovering around this level and can’t break through $48,000 – $54,000, then there’s a very strong chance it could lose half its value or even more before starting a new pump.