Summing Up The Week

The week kicked off with news that President Donald Trump may have asked the leader of Ukraine to investigate Vice President Joe Biden’s son who works for a Ukrainian-based oil company. Naturally, with Biden as a Democratic opponent in the 2020 Presidential Election, asking the leader of a foreign country to investigate or interfere with a candidate has been considered by many Democrats in the House of Representatives as a criminal act and abuse of the Office of the Presidency.

House Speaker Nancy Pelosi and others announced intentions to impeach Trump and the markets were off to the races for most of the week on that news, yet another ingredient adding volatility to the markets.

Then, on Friday, a “leaked” source told CNBC that the White House was considering restricting all U.S. investment in China, sending markets lower.

Let’s look at the specific stories that moved the markets this week…

Market News

President Trump asked Ukraine to Investigate Biden’s Son

The markets sold off on Tuesday when Democrats on the Hill made calls to begin impeachment proceedings regarding a call President Trump made to the Ukraine in July where he asked the Ukrainian leader to investigate Joe Biden’s son, reported CNBC.

Democrats in the House of Representatives point to the phone call as a violation of Trump’s oath of office and state that his utilization of the Office of the President of the United States to potentially further his own political ambitions is criminal in nature and not in the best interests of the citizens of the United States.

Although the markets recovered slightly from their lows when Trump announced he would release the transcripts of the call, after the markets closed for the day House Speaker Nancy Pelosi announced the Democrats would be pursuing impeachment.

On Wednesday, Trump released the transcripts of the phone call which showed that he did, indeed, ask the Ukrainian leader to “look into” Vice President Biden and his son, reported CNBC

While Wall Street processed the news on Wednesday, the markets remained relatively flat.

Some analysts believe that although Trump may be safe from having to resign, the Senate, predominantly Republican, will likely not vote in favor of Articles of Impeachment against Trump. However, the same analysts also believe impeachment hearings could impede any potential trade deal with China as Chinese leaders may decide not to negotiate, and, instead, will wait for Trump’s impeachment or election of a different President in 2020.

Whistleblower Complaint Declassified

On Thursday, the House of Representatives released a redacted version of whistleblower complaint that started the investigation into President Trump’s Ukranian phone call. In the complaint, the whistleblower details an “urgent concern” that the president is “using the power of his office to solicit interference from a foreign country in the 2020 U.S. election,” reported CNBC.

The complaint also alleges that the Trump Administration made efforts to surpress the records involving the July 25 phone call with the Ukrainian president.

The markets sold off following the release of the report as analysts try to determine the weight and effect of the report. 

For those who are so inclined, CNBC has provided a copy of the entire complaint here.

U.S. to Block Investment in China?

On Friday, a source told CNBC that the Trump Administration is considering blocking all U.S. investments in China in an effort to hasten trade negotiations. 

While the source emphasized that the concept was in its “preliminary” stages with nothing concrete decided at this point, the restrictions would be put in place to protect U.S. investors from the lack of regulatory supervision in China.

Markets sold off following the news during Friday trading.

Next Week’s Gameplan

While there are several stocks approaching various interesting levels both in terms of adding to positions or taking profits, I’m patiently waiting for things to line up. If it’s not a perfect pitch, I’m not swinging.

This Week in Play

Stay tuned for this week’s episodes of Investments in Play and Trades in Play coming online later this weekend! 

Crytpo Corner

Important Disclaimer

Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.

Bitcoin Price (in USD)

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Weekly Change

Bitcoin Price Action

The more things change, the more they stay the same.

Bitcoin lost its footing on Friday but seemed to regain ground on Sunday before completely losing it. Bitcoin collapsed on Tuesday, plummeting nearly -14% from the $9400-$9500 range to $8159 in less than two hoursIts $8159 low didn’t hold on Thursday, with Bitcoin continuing its drop, making a new weekly low of $7712.45 with no signs of stopping anytime soon.

Unsurprisingly, Bitcoin’s death-drop brought the entire crypto sector with it, yet another reason why Bitcoin is the only crypto I choose to hold with any significant positions in the space. Regardless of the price action in the other coins, Bitcoin will take out all others when it sells off with enough force. 

Obviously, the entry of institutional buyers over recent months and the opening of the Bakkt Exchange on Monday weren’t strong enough positive catalysts to prevent the dramatic selloffs the crypto space has become known for. Tuesday proves any HODLer claims that Bitcoin is far more stable now than in prior years are completely wrong.

Why did Bitcoin drop? Well, it dropped on… wait for it … absolutely no news.

The fact the crypto dropped with no catalyst should come as no surprise to anyone who’s been following my Crypto Corners over these past many months. As I’ve been saying forever: The only predictable thing about Bitcoin is that it is completely unpredictable.

Where will Bitcoin go from here?

All those who seemed to think the 2018 low of $3128 was a distant memory might be surprised if 2019’s fourth quarter is anything like 2018’s. On the other hand, whenever Bitcoin cools off its Daily Relative Strength Indicator (RSI) in the past (see details below), it typically makes another huge leg higher.

Only time will tell…

Bitcoin Gameplan

Like many in the space, I had been looking for a massive drop in Bitcoin for quite some time. Historically, Bitcoin has never made a leg higher without cooling off its Relative Strength Indicator (RSI) on the Daily time-frame, and it hadn’t done that on this round… until Tuesday, that is.

I ended up opening my position with an almost uselessly small buy at $9526 when Bitcoin looked to find a small modicum support after dropping from the low $10,000’s.

When the $9000 support fell away like a wet toilet paper tightrope act, Bitcoin careened through three more of my buying targets – $8978, $8667, and $8228 – where I added small amounts before Bitcoin hit a temporary low of $8159.35 on Tuesday. The low didn’t hold when Bitcoin dipped further to make a new weekly bottom at $7712.45 on Thursday.

My position now has an average per-coin price of $8836, however, I only have 4.17% of my desired allocation at this point. Obviously, my small orders indicate I’m not confident Bitcoin’s even close to its bottom… not by a wide margin.

My next buy target is $6837 followed by additional buys at stages all the way down to the low $3200’s near Bitcoin’s 2018 low of $3128.89. However, even if Bitcoin gets that low, I’ll only have 27.85% of my desired position allocation at that point.

What am I waiting for? What’s with the Small Allocation?

As much as I am bullish on Bitcoin in the long run (think years and decades, not days, weeks, and months), I believe Bitcoin might need a complete reset before it makes higher highs. In fact, I think Bitcoin could potentially crash through its 2018 low near $3130 and head much, much lower.

My first significant single buy order (about 13.5% of my desired allocation in one order) will take place if Bitcoin drops through $2700 with additional buy targets lower. In fact, Technical Analysis shows nightmarish lows of around the $1775-1800 mark as possible.

Why Buy-in-Stages? Why Not Wait and Go “All-In” at the Low?

Even though I often describe Bitcoin as unpredictable, the crypto actually has followed certain semi-predictable patterns over the years. 

For instance, during past Bull Markets, Bitcoin has always pulled back 20-40% on the way up before breaking through to new higher-highs:

Before making its all-time highs of $19,891.99 in December 2017, Bitcoin pulled back more than 20% from $7898 to $6201.01 on November 9-12. It pulled back more than 20% again, this time in just 24 hours on November 29, from $11485.00 to $9135.60. It even gave speculators one last buying opportunity from December 8-10, pulling back more than 30% in under four days from $19697 to $13501, a week before it made its all-time high on December 17.

While it may seem counter-intuitive for an asset to pull back so significantly in order to make higher highs, it’s simply how Bitcoin has moved, historically. In fact, this pattern was one of the indications for me that the current Bull Market of 2019 needed to cool off more substantially, leading to my looking for this week’s drop.

Given its current high of $13,868.44, Bitcoin’s decrease to the low $8000s would be right in line with its historical “restorative pullback” as a 40% pullback from the current 2019 high gives us a $8321 price target. Additional analysis shows that a 30% pullback from its recent “stable” level around $10,000 would give us a target in the low $7000s, a move not unusual for Bitcoin.

However, there’s no way of knowing if Bitcoin’s current downside move is one to build up strength for an additional leg of 2019’s Bull Market or will Bitcoin will drop 50-85% through all support like it did in Q4-2018?

In November 2018, Bitcoin pulled back 15% on November 14 from $6259.35 to $5280.93. Just five days later, Bitcoin pulled back another 27% from $5560 to $4035 from November 19-20. This was followed by a final nearly-30% draw-down from $4414.89 to its $3128.89 low taking place from November 29 to December 15, 2018. The total drop? A loss of 50% in a month or a death drop of 84.27% from its all-time high made in 2017 to its 2018 low. 

A drop of 2018’s magnitude gives us a price target of $5,025.57 if we drop 50% from our recent ~$10,000 stabilization level or even lows below $2100 which would represent an 84% drop from our 2019 high of $13,868.44.

By Buying-in-Stages, I see some profits should Bitcoin bounce before I get my full allocation, but I also manage my risk in case we see an epic down move where I’ll have capital on the sidelines to add more to my position at “discounted” prices thanks to not going “all-in” too soon.

What if Bitcoin Crashes Through the $2,000 mark?

While a sub-$2,000 price could present an incredible “buying opportunity,” it’s also difficult to say what such a low price on Bitcoin would do to the general psyche of speculators and the public perception of the cryptocurrency space as a whole.

Could Bitcoin recover from that point?

While Bitcoin has always recovered from prematurely-declared “deaths” in the past, a sub-$2,000 price represents a 90% drop from Bitcoin’s near-$20k all-time high.

Could a 90% pullback be a bridge too far, scaring away too many speculators and preventing the cryptocurrency from ever recovering?

Maybe.

Or maybe Bitcoin will just rise like a phoenix from the ashes once again.

Do I Hold Positions in Other Cryptos?

In addition to Bitcoin, I am building small positions in Ethereum (ETH), Litecoin (LTC) and even the original Bitcoin Cash (BCH). These four cryptocurrencies were the only coins traded on Coinbase when it launched in the U.S. and have huge followings because of it.

Even though Coinbase carries many, many others at this point, BTC, ETH, LTC and BCH represent the coins with the biggest speculation audiences and, therefore, will have the most liquidity during Bull and Bear Markets.

That being said, Bitcoin will always be my primary holding with a portfolio allocation targeting the following allocations:

  • BTC: 75%
  • ETH: 8.33%
  • LTC: 8.33%
  • BCH: 8.33%

What happens next? Take Extreme Care.

Given the week’s death spiral in Bitcoin, definitely remember my disclaimer below: Bitcoin is a wild ride and this week’s action shows the crypto space has no interest in taming itself anytime soon.

Speculation in the space will rip your face off if you’re not extremely careful and plan all moves in advance. Even then, Bitcoin can gut-punch even the most disciplined trader.

DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.

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