Bitcoin to Crash Below 12,000 by Late 2022

Bitcoin crashed 73 per cent between October 2021 and June of this year before turning to rise strongly. So, is the current rise a sign of things to come or is it just a sucker’s rally? On 13 August, Bitcoin hit a high of 25,554.38, which represents a rise of over 36 per cent or 1.5 per cent per day over 56 days since its low on 18 June. While most investors would love to find stocks that rise at this rate, as with anything that rises at such a sustained rate, we need to accept higher levels of volatility and risk, and Bitcoin is no exception.

Managing the risk of trading Bitcoin

There is no doubt, given the lack of regulation around cryptocurrencies that the crypto market is manipulated. As such, you would be wise to exercise extreme caution with this asset, otherwise you could expose yourself to a Pandora’s Box. That said, this doesn’t mean you can’t make money from crypto if you are educated but unfortunately most who invest in this area are not. Instead, they jump on the bubble train for fear of missing out, which is why those who could least afford it, lost heavily during the crash into June of this year.

Smart investors know that everything runs in cycles and while Bitcoin has been bullish of late, I believe the probability of the current rise being a sucker’s rally is quite high. No doubt, the Bitcoin faithful will strongly disagree with me, as they did late last year when I said it would crash and as they have done several times in the past when I predicted it would fall heavily.

As an analyst, I need to ignore the irrational points of view, which means not listening to the masses who act emotionally and just look at the data. There is an overabundance of irrational thinking in the crypto space in much the same way the tech bubble unfolded. Right now, the data is indicating that Bitcoin is likely to fall into a low around late October or into November and it is likely to be trading below 12,000 and possibly as low as 7,000. If it falls to around 7,000 then this will be similar in size to the fall that occurred in early 2020 and several other times in the past.

If you are serious about trading Bitcoin, my advice is to educate yourself to be able to properly analyze the data, so you avoid the rollercoaster ride that so many experience.

What were the best and worst performing sectors last week?

The best performing sectors included Materials up 3.38 per cent followed by Consumer Staples up 3.33 per cent followed and Energy up 2.81 per cent. The worst performing sectors included Utilities down 1.86 per cent followed by Financials down 0.72 per cent and Information Technology down 0.46 per cent.

The best performers in the S&P/ASX top 100 stocks included Brambles up 12.39 per cent after releasing good full year results last week. This was followed by Whitehaven coal up 11.18 per cent and Treasury Wine Estates up 8.49 per cent. The worst performing stocks included Bendigo Adelaide Bank down 11.22 per cent after releasing disappointing results last week followed by AGL energy down 7.76 per cent and Evolution Mining down 6.99 per cent.

What's next for the Australian stock market?

The All Ordinaries Index continued to defy logic rising again last week, which means it has been rising for 39 trading days or eight weeks straight without price falling below the prior week’s low. We haven’t seen such a sustained rise in the market since November 2012 when it rose 18 per cent over 113 days or 17 weeks. That said, the current rise is moving at a faster rate than the rise in 2012, as it has risen nearly 12 per cent in less than half the time.

Right now, the market is walking up a see-saw and it will hit a point where it starts to descend but the problem with this is that unlike a see-saw where we know the tipping point, the All Ordinaries Index could start its decline anytime. What I do know is that the more the market rises, the higher the probability it will fall.

Currently, there is a lot of negative news about the market and what is occurring or may occur with the US and Australia economies and how this will affect the stock market. However, investors should be very selective about what they listen to given that what is happening in the US and Australian markets does not really support this bearish narrative.

On a positive note, reporting season has so far delivered some great results for a number of companies, while others have reported average or slightly below par results but certainly nothing to be alarmed about.

For now, good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.