Not long ago, cryptocurrency felt more like something out of the Matrix than a legitimate currency and financial market. Certainly, people have been making money on it, but how long can we truly sustain trading on an idea of money?
Over the past year cryptocurrency gained some legitimacy with large investors beginning to use crypto as a hedge against inflation concerns. But after a few bad weeks, it’s hard to feel confident following their lead without more information and a real strategy.
When was the last time we saw a market as volatile as cryptocurrency? A single tweet from Elon Musk sends the markets whirling, causing people to buy and sell their coins by the thousands. This is a market that has dropped 30% and then gained 20% within a single week. Do you sell or hold? Do you stay on the sidelines or jump in? What is the best way to evaluate a market that’s so unpredictable?
In markets like this, I’m reminded of Ralph Acampora, “the godfather of technical analysis.”
In 1995, Acampora stunned the industry, when he predicted the Dow Jones Industrial Average would be entering a bull market and rise to 7,000 from 4,500. When the prediction panned out, Acampora’s colleagues and contemporaries were duly impressed, but he wasn’t done. He continued to analyze trends to accurately predict the Dow climbing above 10,000, cementing his legacy.
So, what does this have to do with cryptocurrency? We’re currently at an inflection point where this investment is moving from novelty and a wild west mentality to mainstream investors looking for statistical analysis of market trends as a guide. While volatility appears to be in crypto’s DNA, it’s hard to imagine having more data points to work with. Already in 2021, the crypto market has experienced 39 days with a rise or fall of five or more percent. Bitcoin Bulls argue that this volatility is a positive. They say the volatility is essential in creating opportunity for large gains in value.
More moderate commentators point to the reality of regulation from world governments, saying investors are already getting spooked. Big corporate investors also seem to be slowing down their purchases.
And then the detractors. It’s impossible to read about crypto without at least one analyst loudly proclaiming the crypto market is a bubble that’s about to burst.
With all of these conflicting views, it helps to look back to a bright time when one brilliant analyst took the available data and saw the future with clear eyes, focused solely on the charts. Who is crypto’s Ralph Acampora? Is someone out there ready to lead us to the investing light?
As companies and financial institutions are beginning to dip their toes into the world of crypto, it seems clearer than ever that this financial instrument is here to stay. In 30 years, we will look back and name someone the Acampora of crypto. Someone who analyzed the market, read the tea leaves, and saw the future. For those of us tempted to dive into the market now, let’s hope we can recognize that person when he or she arrives.