Have you noticed how frothy the stock market has been? The VIX, also called the fear index, recently reached an all time low of 8! That level of complacency is screaming a warning to avoid being the bag holders when the given market crash comes. Consider a rubber band that is being stretched and stretched.....the snap moment that breaks it is expected to happen to this euphoric equity markets. As no one can precisely identify the when, it's wise to heed the current stretched state and start moving assets out of equities and go cash.
The below chart displays a possible scenario and allows leeway for SPX to hit 2,600 or higher. This will only mean that most who don't heed the warning to exit are hoping on the "greater fool" theory. The equity markets are very well into everyone hoping there is a greater fool to buy higher so they can make another 100 spx profitable points. Nuts!
https://www.thestreet.com/story/14248061/2/biggest-bear-market-of-the-century-is-still-on-the-calendar.html
Some are recommending that assets be moved into bonds....I strongly disagree. If you look at the great depression crash and the not too long ago financial crash, bonds and stocks dived together. This doesn't exactly reflect safety and that's why cash would be most ideal. Treasury Bills are very similar to cash so a bond fund that holds only Bills would be cash equivalent.
So, the key question: When, not if, but when the equity markets crash, what will happen to bitcoins, ETH, LTC and other cryptos? I think it's first important to understand that cryptos are perceived as an asset and are currently traded as such. When the margin calls come in for the equity holders who also hold cryptos, they will be forced to liquidate assets and those assets can be stocks, bonds, real estates and even cryptos. Margin is a killer of wealth more than stupidity. When a margin call happens, one has no choice but to comply or negative actions will be forced on them.
Whether you agree or disagree, I believe the bitcoin and alt coins will also experience a severe price plunge when the equities crash. Here is a chart with a possible scenario, as laid out in Elliot Waves:
https://ewminteractive.com/bitcoin-traders-running-hills-already
We are currently heading towards achieving wave III for new all time highs of $3,400 or so. This is expected to be followed by a wave IV decline to what are current levels of $2,600 and then wave V for one more all time high of around $4,000 but I think more twards $5,600. Remember the bitcoin bear market during 2014 and 2015 where prices languished sub $300? This shows that bear markets happen to any asset and cryptos are no exception. That means once wave V is complete, a bear market on cryptos will ensue.
For now, the equity market dominates as the asset class and since its owners also own cryptos, a major stock market crash will have severe bear market implications for both. The key difference will be the degree of severity and that's when cryptos rise above all other asset classes. If the above EW chart is even close to being accurate, a decline just below $2,000 from a high of $4,000 would represent a most severe BUYING OPPORTUNITY!
This is how EW allows a small peak around the corner so as to ascertain the probabilities and plan accordingly. This means to raise cash first by selling equities and later cryptos. Having sizable cash eliminates the fear and provides plenty of dry powder for better prices. So, yes, I believe all time new highs for bitcoin is dead ahead and that's when cash should be raised by taking profits. My target is to unload 75% of all cryptos in a staggered, laddered profit taking steps and have the cash ready to deploy at much better prices.
I believe the ability to observe and assimilate allows one to better discern probable outcomes. This blog post reflects my attempt.
If this blog post has entertained or helped you to profit, please follow, upvote, resteem and/or consider buying me a beer:
BTC Wallet - 19gHMJc9wi9KkP47wokz8y4cFNgz1kAAUE
ETH Wallet - 0xf83641dbf1a53498eae6d0d568c969790da48a36
LTC Wallet - LU1mEw1LHvffoWf9VDEVdP7Day4jv6VLqu
EOS Wallet - 0xf83641dbf1a53498eae6d0d568c969790da48a36
Legal Mumbo Jumbo: This is only my opinion, make of it what you wish.
Thanks for sharing (from bot)
Nice theory. But really, nobody knows what can happen when stox market crasshes. It might as wll help cryptos replace it faster.
I believe it will but not in the beginning phase of panic because panic has no reason. It will be afterwards, once sentiment turns away from FIAT that cryptos will get the main street spot light. This is why the panic phase will be the greatest buying opportunity for bitcoin and top alts.
Hey @haejin,
Good article. I'm with you that the stock market is crashing soon. I know my Dad's been talking about it for a couple years and almost every analyst is thinking it'll start this year.....I'm also with you on a bear crypto market that we're due for just like in 2014-2015. I have been telling people this as this latest rally over the last few months just can't sustain. Last bear market found support at the high before the rally, so if that's the case here, we're looking at $1,300ish. Thoughts?
My longer term thoughts: We are heading towards wave III
