...and continues struggling to climb on treacherous terrain...

After an exuberant day of positivity, the market again tested Bitcoin's value at around $8 000. This returned the rest of the market to a state of doldrums.

Why $8 000 (give or take a few hundred)? What is it about this amount that seems to attract a psychological floor for Bitcoin?

I'm no expert in technical analysis (I'm no expert in horoscopes and astrology either, mind you), but I think this can be boiled down to a pretty basic psychological behaviour. Around the $8 000 mark, if we look back a few months, we can see a large spike in volume that took place between a gradual accumulation in the $4 000-$5 000 range before climbing rapidly toward $15 000.

So, in other words, a lot of people bought Bitcoin around the $8 000 average, established over months of buying and selling. Now, if enough people bought at this average price (the majority in fact, which is what makes it "average"), it makes sense that those same buyers would feel that Bitcoin is worth buying again at this price point, and worth selling at a higher point than where they bought. This creates a sort of free market "tug-of-war" between buyers and sellers.

This is the problem, and the saving grace of the free market. We can only sell something for what others perceive it to be worth. It doesn't matter that you bought Bitcoin at $15K. What matters is what the majority of the market is willing to pay for it. Many traders have automated buy orders set to purchase more Bitcoin around the magical $8 000 price point, so each time it lands there, it bounces back up. These same buyers might also have automatic orders set to sell at $8 500, for example. If they're trading in large sums, this can be extremely profitable. For the average schmucks like you and me that are trading small sums, this makes little difference, but it can be hundreds of thousands of dollars of profits when trading in large amounts.

Now, the tricky part, of course, is that one can look at other times that there were large accumulations at other price points. The next lower price point is around the $4 000-$5 000 mark - from back before everything went crazy after SegWit implementation and Bitcoin Cash fork drama ensued. It's possible that a large amount of traders have their sights set on buying at this price point and might just sell through the $8 000 threshold if they are still up on the deal from their original $5 000 purchase price.

Add to this buying and selling free market psychology the fact that any bit of news about cryptocurrency can cause a mob mentality to take over and euphorically inflate (see Litecoin's jump yesterday after Litepay announcements) or deflate prices on fear, uncertainty, and doubt. This is what makes things pretty tough to predict or pinpoint with any degree of accuracy.

So, again, I recommend a dollar-cost averaging approach - put in a little bit of investment money on a regular basis (weekly, maybe?) to soften the impact of large drops and to resist the fear of missing out on big jumps. Ideally, buy at the threshold points, like $8 000, if you can. Sure, it's not as exciting as jumping on a rocket, but over time, this market is working its way up. You just have to hodl and keep on slowly climbing. Of course, you should only be spending what you can afford to lose. This is a highly risky and volatile market.

*This is not professional trading advice - it's just my opinion!

image source:

https://news.nationalgeographic.com/2016/01/160103-honnold-climb-mountain-solo-adventure-ngbooktalk/

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