Thinking about getting into crypto? Here’s how you do it. – November 11, 2024
Dan Fitzpatrick here at StockMarketMentor.com. Welcome to Bitcoin Monday. Actually, over the weekend this thing started running pretty good/
This is what the weekly chart looks like. You can see we’re really, really closing in on 90,000. The nice thing is that you don’t have to buy one Bitcoin. You can buy $5.00 worth if you want, or 5,000, or the way Michael Saylor seems to be doing it, and the US soon enough, 5 billion. There’s a lot of money coming into this, and I think a lot of money will to continue to come into this.
Here’s the daily chart. You can see, this thing has really, really been on a tear. I want to show this because of the way this is moving, and to me, it is more compelling on the weekly chart, the way this is moving this has a pretty good chance of hitting 90,000 pretty soon, really soon. So my suggestion is, you’re either in or you’re out, but one way or another this is going to go, it’s either with you or without you.
I want to look through the things that we’ve got going here with IBIT ( NASDAQ: IBIT ). This was a stock that we got into a while ago before this big run. It had been in a nice trading range, this maroon, magenta line here is the 8-period moving average. You see all these other lines, the red line is three standard deviations. The black line is two standard deviations, and these are classic Bollinger Bands.
When a stock runs outside three standard deviations, like it is now, it has a very, very, very high likelihood of pulling back or at least drifting sideways. Not necessarily this, but at least drifting sideways. What we don’t know is whether this is going to run up further before it drifts back. But you can see right up here, there’s really no place that this has run outside three standard deviations.
If you look at MicroStrategy ( NASDAQ: MSTR ), this is also outside three standard deviations, and it hasn’t been here before. Let’s see what MSTX ( NASDAQ: MSTX ) is like. This thing is crushing three standard deviations. All of this stuff, we’ll look at Riot ( NASDAQ: RIOT ) is at three standard deviations. MARA ( NASDAQ: MARA ) is at three standard deviations. CleanSpark ( NASDAQ: CLSK ) is at three standard deviations.
What I’m telling you in all of this is, this stuff is massively, massively overbought. Now, the thing about stocks and charts that show overbought and overbought nature, they just continue to get more and more overbought up until the time that they don’t. A classic mistake made by traders or typically people who used to trade is, they’ll look at something like this and say, Oh, I’m shorting this because three standard deviations, this has gone up enough. It’s never done this before, I’ve got to get short this.
Now, that’s a pretty crowded trade, and it’s probably one of the reasons why these things just continue to go higher. There are a lot of reasons for the big enthusiasm in Bitcoin, one of them is that Michael Saylor continues to buy more. I think the guy with MicroStrategy ( NASDAQ: MSTR ) wants to corner the market. Also, you know that foreign nations and other nations are actually buying Bitcoin as a store of value or reserves.
Trump has given every indication many, many times, I think it was even at some Bitcoin convention, that he wanted to do that as well; that the US would start investing in Bitcoin. And by the way, they aren’t day trading that stuff, they’re just soaking up supply. So there are a lot of reasons for Bitcoin to be running up. In this morning’s note, I mentioned that the biggest knock on Bitcoin, on crypto in general is, it’s worthless, it’s worthless, there’s no value there. Well, dude, there’s no value in the dollar either.
The dollar is worth less than nothing because we owe so much money, I think over 39 trillion bucks in dollars. You could say Gold isn’t worth anything either, it’s not worth anything. What is it, it’s a big heavy yellow metal. So why do the dollar and gold have a price? I’ll tell you why because they’re accepted mediums of exchange. The price right now of MicroStrategy ( NASDAQ: MSTR ) is $340.24. That’s the fair value of MicroStrategy ( NASDAQ: MSTR ). Why do we know that? Because that’s where the stock traded, it is fair market value.
The price of gold, at least GLD ( NYSEARCA: GLD ), is $242.11 on this chart. Why? Because that’s where the stock is trading right now. So this is the fair price, and it will change tomorrow. But if the bids totally dropped out of this, and nobody wanted to buy this stock, the fair value would be zero. And so it’s important to be mindful of that when you’re looking at a new asset like Bitcoin. One of the things that’s freaking out all the politicians and all the Central Bankers on this particular planet is that Bitcoin is gaining in popularity.
And there are others as well, Ethereum, Solana, I get that. But I just hold a bunch of Bitcoin and I’m happy, I’m really, really happy. The reason that these Central Banks and these politicians, and these Treasury Departments like good old jumping Janet Yellen and Gensler are so pissed off is that Bitcoin is gaining in acceptance. And it’s the acceptance of something that creates the value. I’ll say it again, it’s the acceptance of something that creates the value.
If enough people start to value Bitcoin they see it’s actually worth something, they see it’s actually an asset class. There’s going to have to be something major that happens to convince everybody that it has no value. Think about COVID, how many lemmings were wearing masks, running to the drugstore to get your free COVID shot, maintaining your distance, and being pissed off at somebody who was walking through the parking lot not wearing their mask? How many of you were doing that?
Is it easy for somebody to dissuade you to believe that maybe we went a little overboard? Some people will cling to that and maintain that that was the correct way to do this. No disparaging meaning for any of that. The point is, you cannot dissuade a massive, massive, massive mass of crypto owners and investors, that suddenly their asset is worth zero. There’s too many of them, there’s just too many of them.
What I’m trying to do, I’m trying to lay out this case in a really, really simple way. I’m not talking about blockchain or anything, no kind of chain. It doesn’t matter, I don’t care about that right now. What I’m talking about is just the mass, we’ll call it the delusion of crowds. If you think that the crowd is delusional with respect to Bitcoin, do you know what I would say? I would say, Join the Crowd, that’s what I would say. Join the crowd because this thing is going higher.
Now, is it going higher tomorrow? Now we’re back here at three standard deviations. Let’s go into the intraday here. The thing that’s really, really obvious is, you get this big spike up and then a drift sideways here. This ( NASDAQ: IBIT ) started to lose momentum, now three standard deviations here. This is off the 30-minute chart, the three standard deviations just exploded past this. But this is dropping in momentum. You can see the others doing essentially the same thing ( NASDAQ: MSTR ), ( NASDAQ: MSTX ), just pulling back a little bit, Riot ( NASDAQ: RIOT ) more so than that, ( NASDAQ: MARA ).
We’ll go through these, ( NASDAQ: HUT ). All of these got really, really big first thing in the morning and then started rolling over. So my sense is that we could see a bit of a pullback tomorrow. Unless you’re brand new to trading or you’ve got some emotional challenge, you can’t look at this and say, It’s going to the moon. It might, but this is not good trading if you just want to buy, buy, buy here.
You have to be waiting for some type of better entry on this ( NASDAQ: MSTR ). This is how I would suggest doing this, ( NASDAQ: IBIT ) you can apply this to any of these charts. I just drew this perspective candle, I should say. And what I’m telling my members is, you can continue to ride it but as soon as you see this type of thing, maybe it will gap up tomorrow.
But then, if it trades down and closes in the lower part of the range, really low in the range, in other words, there’s really no wicks. There’s really nothing like that, it’s more like this type of thing. If it closes right at the low of the day, or close to it, that’s your sign that this trend is ending, at least for now. You are going to see this, whether it’s tomorrow or Wednesday. But one of these days you’re going to see this pull back.
So my suggestion is, to keep an eye on this chart. This one doesn’t really matter, this one is irrelevant right now, it’s moving too much. Keep an eye on the daily chart, and then you can even look at the stock on an intraday basis. Just keep track of it on the volume-weighted average price. So here, the VWAP is down here at 48.23, so if you say, Well, when the stock starts trading below the VWAP, then I’ll go ahead and take some of this off.
Well, that gives you a risk of about 3 percent. Or you can say, No, I think I’ll keep it down. Maybe I’ll even close it if it falls below today’s opening or today’s intraday period low, that’s 6.3 percent. This is how you would protect your position. Or guess what? You could do a bunch of both here. You could do half here, just below the volume-weighted average price, and half just below the opening rotation low of 46.53.
If you’re doing that, then you’re not going to be too far from top-ticking it. You can do something like this, I snapped the line just before today’s volume-weighted average price. If this is going to continue to work, this VWAP is going to continue to stair-step up. So maybe you take half off the table here, and then you set your other stop right here at 46.50, that’s just below today’s intraday low. So you’re out here at 48.11, you’re out here at 46.50 and that gives you a pretty nice cost basis on your exit.
If you’ve been in this for the long haul, selling somewhere around here gets you out very close to the top. Unless you’re a longer-term holder, and by the way, I’ve been holding Bitcoin for years and years and I’m not trading it, obviously, I’m just holding it. Unless you’re a real holder of this, if you’re a trader, once this has made its move lower, I personally would not suggest holding any. Because this could give a heck of a move lower.
If you do decide to just hold some through whatever pullback this is going to give you, at least be aware that you can always buy it back if this starts to move higher. You can’t always sell it at a higher price if it continues to move lower. Just make sure you have your trading plan intact. If you have your trading plan intact you’re good.
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