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Bitcoin Crash And Important Lessons For The Investors

May 26, 2021 6:55 AM ETBitcoin USD (BTC-USD)7 Comments
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  • Bitcoin's recent crash was clearly discernible in its price chart. I have posted that analysis on Sunday, 15 May while Bitcoin was trading above $50,000.
  • Reader comments revealed that most dismiss chart analysis as unworthy superstition. After 25 years in the markets, including managing hedge funds for 15 years, Istrongly believe this view is mistaken.
  • Over the long haul, chart analysis and trend following are probably the only valid solution to the problem of uncertainty.
  • Short article and a 14-min YouTube report are below.

On Friday, 15 May I posted an impromptu analysis warning about the imminent price correction or reversal for Bitcoin. On ZeroHedge, the article  got some 7,300 reads and 24 comments.

Chart analysis: not rocket science - but still scoffed at as superstition by the learned expert class.

Although the analysis could not have been more spot-on, reader comments were largely dismissive. One reader called my analysis 'hogwash.' Another asked if I also consulted entrails of slaughtered sheep or Tarot cards. Someone mockingly asked when was the last time chart analysis actually worked?

This all once more underscored the unwarranted and unjustified rejection of chart analysis and trend following as a legitimate and effective solution to the problem of uncertainty - the key problem we must address in managing our trades and investment portfolios. For many traders this experience with Bitcoin was extremely painful. Allegedly, over 775,000 traders had their accounts liquidated as a consequence.

zerohedge on Twitter: "On Wednesday 775k+ traders had their account liquidated, equal to $8.6B worth of crypto - BybtCZ hands / Twitter"

This Bitcoin episode was merely the most recent case study underscoring the crucially important lessons about effective and ineffective ways we deal with uncertainty, the most important challenge all investors, traders and hedgers face. I have therefore put together a follow-up commentary in a short YouTube report. I believe it will be worth the 14 minutes of your time:

Alex Krainer - @NakedHedgie has worked as a market analyst, researcher, trader and hedge fund manager for over 25 years. He is the creator of I-System Trend Following,and publisher of TrendCompass reports. His views and opinions are not always for polite society but they are always expressed in sincere pursuit of true knowledge and clear understanding of stuff that matters.

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