Legendary Bitcoin Short Seller Says To Watch For Base To Form Before Buying
A legendary short seller who shorted the 2017 Bitcoin bubble top just before the bubble began to deflate, has some sound advice for crypto investors looking for an opportunity to buy: Wait for a base to form, much like what happened in early 2019 when Bitcoin bottomed.
Mark Dow, Legendary Bitcoin Shorter, Dissuades FOMO-Buying BTC
Mark Dow is a global macro trader and author of the blog Behavioral Macro. The former US Treasury economist focuses his analysis on technicals based on market behaviors and has a knack for calling tops and bottoms.
Dow famously shorted Bitcoin at its 2017 peak and then tweeted about how he had closed the short back in December 2018, just as Bitcoin bottomed. Although he at that point said he had “absolutely zero interest in going long,” he eventually began to notice signs Bitcoin was forming a solid base and flipped bullish in March just ahead of Bitcoin’s 2019 parabolic rally.
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That base, Dow says, is an important signal to watch for before buying Bitcoin given the current downtrend it is in. Until that base begins to form, Dow says its best to use a wait and see strategy.
In his latest blog post on Behavior Macro, Dow explains that although he understands that “FOMO here is irresistible” for those “fundamentally bullish” on Bitcoin, it doesn’t mean that buying here is a smart idea.
#Bitcoin is dying.
— Dow (@mark_dow) November 21, 2019
Dow claims that after a massive selloff, “a lot of technical damage” has been done that “needs to be repaired” before a safe entry in a long-term position is possible. The two most important things Dow says traders and investors need to be aware of is building a base – much like what happened at Bitcoin’s $3,000 bottom – and overhead resistance.
He suggests that Bitcoin is nowhere close to building a solid base, and overhead resistance was clearly too strong that the entire historical rally has since been erased completely, leaving nothing but massive wicks into that resistance behind on Bitcoin price charts.
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For fundamental Bitcoin bulls that can’t resist taking a position at current prices – down nearly 50% from the year’s highs – then it is recommended being “ultraconservative.” Dow even specifies that taking a short position here also isn’t advised and could be just as risky.
Those that do take a position are advised to set tight stops due to the chance volatility picks up or be stuck babysitting the position, ready to flip the other direction depending on price action. Otherwise, watch for a base to form before buying more BTC or opening a long position, no matter how appealing current low prices may seem.
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