Everybody who says, “Bitcoin trading is easy” is just fooling himself. While you can try to predict the market, but you won’t really know what is going to happen due to multiple factors that can affect the future price. If there’s anyone who has successfully predicted Bitcoin pump or dump in the past, it doesn’t mean he’s going to be correct 100% of the time. Luck also plays a huge factor in someone’s prediction.
For me, Bitcoin trading is like every other trading world out there (with worse volatility). It doesn’t matter whether you trade precious metals, forex, or the stock market; everything can be quite unpredictable at times. It’s about psychology and how people react to all these psychological trading levels. And yes, even if you were correct with your past predictions, it’s actually possible that in the long term, you will start losing money.
Don’t The Whales Trade With Trading Bots?
The narrative that many big traders as known as whales trade with bots still doesn’t change the fact that the decision-makers are still the humans behind the bots. Yes, these trading bots try to predict the market with their algorithm, but keep in mind that the traders always try to “tweak” the bots every now and then. They don’t just put the bot to work passively forever.
The atmosphere in the crypto space also changes from time to time. In 2017, every slight partnership news could usually pump a coin’s price. In 2018 and 2019, it didn’t matter that much anymore. So, yes, even though whales were and still are trading with bots, the decision-makers are still the humans behind the bots. These humans, unfortunately, still have fear and greed. That’s why their bots’ reactions to news and price pumps or dumps are not the same anymore with how their bots used to react in the past.
Psychological Levels And Why They Matter
The thing about crypto trading is that everybody cares so much about psychological levels. It’s not surprising, though, because every other trading world has been like this since many decades ago. Take an example of the forex trading world. Round numbers usually matter a lot, and people often decide to buy or sell a certain fiat currency when it touches a specific round number. In the stock market, psychological levels also decide a lot of pumps and dumps.
Unfortunately (or fortunately), the crypto trading is not that much different. Yes, the players are often different, and how they do it is often different as well. However, it is still the same that many crypto traders also care a lot about psychological levels.
When Bitcoin went higher than $9000 for the first time this year (2020), there were a lot of pending sell orders that got triggered, and it drove Bitcoin back below $9000. Even though Bitcoin eventually surpassed $9000, this story showed that people are still trading around psychological levels that actually mean nothing fundamentally.
You might be wondering, why do these psychological levels matter so much? Well, the answer is because everybody also trades around those levels. It’s like the “self-fulfilling prophecy” kind of theory. When there are enough people predicting the same thing, it’s usually their action that eventually causes the upward or downward pressure to a certain asset price.
For example, when enough people believe that Bitcoin can go as high as $15,000, that means it’s their “buy Bitcoin” actions that actually cause the upward pressure on Bitcoin price. It sounds funny, but it is what it is. When everybody learns how $9000 or $10,000 or $13,000 are important psychological levels (even though they actually mean nothing), it’s these same traders’ actions around those levels that actually drive Bitcoin price up or down.
The Case Of Optimism
This is actually why I remain optimistic about Bitcoin price. The “herd mentality” of many crypto traders actually makes me feel that Bitcoin can go as high as $100,000 (or maybe even more). Again, I don’t want to say that I’m quite sure this will be the case because I don’t have any crystal balls. However, there are a lot of examples regarding how a lot of crypto traders tried to keep pumping a certain cryptocurrency when other big traders did the same thing.
From 2016 to December 2017, you could see this “herd mentality” of crypto traders. The whales started pumping Bitcoin, and everybody else kept buying BTC as well to the point that the demand got much higher than the supply. In 2018, it was the exact opposite. Traders kept shorting Bitcoin, and everybody else followed the same trend. As a result, Bitcoin price crashed from over $19,000 to below $3,500.
Fortunately, 2020 looks like a good year. From January to early February, Bitcoin price has been slowly going up. If there’s anything to learn from the past, it’s that crypto traders might do it again. If the upward pressure is strong on Bitcoin price, everybody would start buying, and we might eventually break the all-time high price point (around $19,500). That level is a strong psychological level. We might break it this year or next year or in 2022 (or maybe never). Nobody knows, but we shall see.
What If We Actually Breaks ATH?
If we break the all-time high (ATH) of Bitcoin price, in my opinion, getting to $100,000 or even more suddenly would become reality. Right now, it’s not realistic to see Bitcoin going up from $9,700 to $100,000, but believe me, it would become much more realistic to see that number ($100,000) if we can get to $20,000.
Obviously, there are multiple scenarios that can happen. People might short Bitcoin big time from $20,000, but who knows it will bounce back again afterward. This “What If” scenario is actually interesting to see because I am a big fan of crypto trading myself.
The point is, crypto traders often try to predict what other crypto traders are trying to do. When there is enough upward pressure on Bitcoin price, most traders might actually pump Bitcoin even more, because they believe “everybody else would do the same thing.” And just like my self-fulfilling prophecy theory above, it’s actually their actions that would realize their prediction.
Once again, this is just one of the “What If” scenarios. As usual, trade cautiously. You will never know what’s going to happen.