Bitcoin, buy the news
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
“Buy the rumor, sell the news” was a term used among traders in the last century. Back then it was profitable if applied to purchasing stock three weeks before earnings release news. A much more powerful principle is a valuable edge derived from this saying. Professionals know that news releases can turn the direction of a market. Consequently, these can be entry or exit points. While amateurs wait for a news release and are victims of their debating process of interpreting the news data, professionals only use the news release as a timing tool for their preplanned trade execution. Bitcoin, buy the news.
With news, volatility is typically increasing, and a larger volume of transactions is at play. For amateurs, data evaluation in a turmoiled market environment generally results in procrastination of execution, meaning no trading or chasing trades. Professionals find necessary liquidity to exit a trade or use volatility to fade moves on less risk for entries.
Last week’s invasion of Ukraine was no different. Only those prepared with a plan were able to position themselves in bitcoin.
Bitcoin, daily chart, the giveaway:
Crypto markets, daily charts as of February 28th, 2022.
A giveaway was a widespread larger supply zone throughout the crypto sector (green horizontal lines on the daily charts above), and preset buy entries in the crypto space were getting triggered. Inter-market relationships stack the odds of placing a successful trade.
Bitcoin, weekly chart, entry target zone within reach:
Bitcoin, weekly chart as of February 28th, 2022.
With our entry target range nearly reached (see our previous chart book release), we were ready to act, knowing a possible larger time frame tuning point was a possibility.
You might argue that the price has not penetrated the entry zone. Still, at a closer look, you will identify that due to exuberant volume on the surprise news day, the supply zone values had changed to provide significant support right at the rim of our initially planned zone. Charts need to be consistently updated to stay accurate!
Bitcoin/Gold-Ratio, weekly chart, another edge stacked:
Bitcoin versus Gold in USD, weekly chart as of March 1st, 2022.
Precisely on the day in question, we also got a hedge rotational “buy signal” for bitcoin versus gold on the weekly chart. Consequently, this signal provided another inter-market relationship edge that supported our decision-making for aggressive entry. What we can see on the chart above that compares bitcoin with gold is that since institutional money has become a massive part of bitcoin holdings, these more significant funds rotate their money in and out between gold and bitcoin.
Following the yellow line, one can see prices being high to buy bitcoin with gold at double top and acquiring bitcoin at a double bottom is a way to take advantage of cheaper bitcoin prices in relationship to gold. For us, a good reason to assume that gold holders might switch to bitcoin for the next foreseeable timeframe, to hedge their wealth preservation portfolios.
Bitcoin, daily chart, profits booked and room to go:
Bitcoin, weekly chart as of March 1st, 2022.
The weekly chart above shows four more reloads within the last five days. All trades have been risk mitigated with our quad exit strategy. Consequently, the remaining position was market money at no risk to us. We posted daily calls to prepare interested parties for possible reentries. Prices have already advanced by nearly 30% from the lows.
This preparedness and merely following rules allow ending up being positioned and not dependent on whether a turning point matures. Even in a negative outcome, profits have been made. With a bit of luck, these remainder positions can go a long way and provide substantial additional profits. In addition, one is positioned early before a trend is even established.