The Current Crypto Market
A Global Liquidity Event
The recent crash in the crypto market is part of a broader global liquidity event affecting all markets, including stocks and gold. These situations, though rare, do occur.
Key Takeaways:
- Those using leverage or derivatives without proper stop-losses are hurt the most.
- For spot holders, it’s tough to see coins drop 10%-20% in 48 hours, with Bitcoin now at a 30% decline. However, after a 70% rise this year, this drop isn't unusual. Selling after such a decline is generally not advisable. The key question is whether this marks a major bull market top.
Looking Back for Insights:
- Historically, assets like gold bounced back after similar events. In the chart below you can see how gold managed to recover more quickly compared to stocks (orange). I believe Bitcoin can recover once the immediate liquidity issues are resolved. Historically, Bitcoin follows a cycle that suggests it will be higher in 2025. That's why I still have confidence in holding my positions.
Technical Analysis:
- The Bitcoin weekly chart shows significant damage, suggesting the rest of 2024 may see lower prices. It's evident that the downtrend is continuing, marked by lower highs and lower lows.
Strategy Moving Forward:
- Panic selling is not the answer. With Bitcoin down 32% from its high, holding through this period is recommended. If further declines occur, especially around $40k, it may present a buying opportunity. For now, the best approach is to wait for a clearer picture to emerge and consider potential rallies as opportunities for derisking.
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Written by Timothy Assi, an Elite Popular Investor on eToro: Follow & copy my portfolio.
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