First of, it is not my intention to promote this coin, or to discuss its fundamentals, but rather simply to look at the chart as an exemplar of the alts. As a pragmatist, I recognize the huge role that speculation plays in both the continued capitalization of BTC, and the booms and busts seen in the wider alt market. As the second [alts] was predicted to leverage the volatility of the first [BTC], I’ve also maintained a position that I call BTC centrism - keep a core in BTC and then speculate in the volatility of alt/ USD as a hedge.
Here is a coin that has exponentially rose, to general acclaim and universal fanfare, to only subsequently fall to what now appears as near universal derision. Of course, as a chartist, I’m not much interested in the ebb and flow of sentiment [yet as a trader, I do have some interest toward sentiment, but only from the more contrarian perspective: buy when there is blood in the streets as they say]. And so with a focus on the chart, I’ll look at what price may be telling me about this coin as both an instrument for shorter-term speculation and longer-term investment.
Context is everything. The first thing the trader/ investor has to keep in mind here is the initial and phenomenal increase in price of over 22,000%. In trader parlance, where the market has become exponential like this, that’s a ‘220x’. In this context, to focus simply on peak price and the percentage decline from that price in purely ‘nominal’ terms [the far right ‘measurement’] would be a gigantic distortion [based on what I’ve previously referred to as a form of ‘money illusion’].
As opposed to this illusory reading, real values have to be read on the chart instead: here [on the left of the chart] we have the 220x to the upside, and then the real fib measurement [measuring in spatial/ geometric/ logarithmic terms the y axis of price] to the downside. As depicted on the left, this gives a current retracement of between 0.38 and 0.5 [between a 38% and 50% real retracement].
The trader/ investor now has something reasonable to go on: though much of the speculative froth has been lost, this coin has still so far managed to retain a 17x appreciation, or ROI [return on investment, measuring the y axis in the logarithmic scale]. The 50% correction also looks reasonable given the previous massive rise.
Of course, that something is not a certainty [which should really go without saying], but it is also something more than a completely random bet. In this most speculative of markets, the measurement of a real retracement gives you a hypothetical middle ground between absolutes, one suited to the savvier trader, who is brave though not reckless, and able to manage risk appropriately.
So where to from here for this more speculative coin? Either it will continue its descent, the equal and opposite of the ascent, or will form a base, recover and finally break out to new all time highs. Given the history [it’s exponential rise, and its solid correction], and given that I think the lynch-pin of BTC is currently in the process of forming a base [based on the LGC model] then I think a trader has a reasonable bet to consider.
Sure, that is a big call given the prevailing sentiment right now, but TA brackets out the sentiment. In this sense it is contrarian. Also, any trade should always be conducted within the parameters of risk management and a wider strategy…. especially the weight of that trade. A single trade should never be a ‘Hail Mary’.
And so lastly to the chart again with a focus on possible buying areas. Is it a sure bet? Obviously not. But it does give some kind of basis and logic on which to buy.
As for a target, where and when that would be, you may as well throw a dart at a board… given TA is neither an exact science nor clairvoyance. That said, given the past history of a 200x, I think another 100x is a distinct possibility within acceptable risk/ reward parameters.
Of course, the ‘weight’ of money is all relative - you could calculate at what point that 100x would represent a significant sum to you, and enter your unleveraged [less risky] trade of 1x, where the loss of that initial sum would not bother you too much [getting the balance here is the tricky part]. This is also to minimize stress and anxiety, which is always the litmus test if you are over-exposed.
In applying TA to the alts, I’m here maintaining that alt trading need not be an out and out gamble. And nor is it a sure thing [if it were, I’d own the world]. A suggestion of alt trading also actually meets the more conservative scruples of the investor in my opinion. For if all investment has an element of risk involved, then perhaps the volatility of alt coins actually ought to be traded [as opposed to frowned upon] as an active hedge against one’s long core hold in BTC. This is the classic hedging swing trade of volatility on the medium-term time-frame. Incorporating some alt trading into your ‘hodl’ outlook would be to have a larger strategy, and a more effective method of risk management in my opinion. And given current market considerations, where the market has corrected heavily, and where sentiment is at an abysmal level, now may just be the opportune time to consider some of these trades.