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| By Beth Canova |
Investor sentiment is a funny thing.
Why? Because it’s illogical.
Everyone knows the core goals of investing — buy low, then sell high. And to buy low, you need to hop into new investments when they’re undervalued.
But so many investors refuse to act until after an asset has taken off … cutting their potential profits off at the knees.
And when things reach a fever pitch and select assets soar? That usually means the market is overvalued and due for a pullback.
But it’s also when a lot of investors try to pile in and get whatever gains they can … before getting discouraged by the correction.
If you follow investor sentiment, you’re not acting at the opportune moment. Instead, you’ll be chasing after cryptos once the sentiment shifts and prices skyrocket.
And since I’ve never been much of a runner, I’d much rather be well ahead of the crowd.
That’s why I stick to the data. Not only does it help me avoid emotional responses in my own investing. But it also provides clarity and insight that market sentiment just doesn’t take into account.
Just take this most recent correction as a prime example.
Shortly after hitting a new all-time high above $73,000, Bitcoin (BTC, “A”) pulled back. It’s trading at the time of writing near $66,500.
If your main barometer for when to load up on crypto is investor sentiment, you may look at this price action and say, “not today” and choose to wait to invest.
That’s understandable … but incredibly short-sighted.
In fact, this is an amazing opportunity to get lower prices on top cryptos before the next rally.
Why?
Well, there are two main things you should know about this correction.
First is that many who’ve been around the crypto market expected this correction.
See, this pullback falls directly in line with Bitcoin’s historical price action leading up to a halving event. And remember, that is supposed to take place toward the end of this month.
Typically, overleveraged traders and weak hands get shaken out in the few weeks before the halving. Then the market tends to consolidate for a few weeks after … before the next rally sets off with strength.
In fact, previous corrections have averaged dips between 20% to 40%. But with prices near $66,500, Bitcoin is only trading about 10% below its recently claimed all-time high.
So, while it may be easy to feel otherwise, we’re experiencing a historically shallow correction considering the halving is later this month.
While past performance doesn't guarantee future results, the current trend seems to be following the script.
The second thing to note about this correction is that there are additional headwinds putting downside pressure on the market. But our Weiss crypto experts all expect these to be near-term factors.
One of the main contributors adding downside pressure is a wallet tagged as belonging to the U.S. government. It transferred a significant amount of Bitcoin — 30,175 BTC, to be exact —– to a reported Coinbase wallet on Tuesday morning.
This $2 billion transaction likely signifies an upcoming sale by the U.S. government, which contributes to downward pressure on the Bitcoin price in the short term.
That’s a big part of why Bitcoin is testing its support levels, marked by the dotted lines below:
But working against this are bullish developments that should have longer lasting impacts on price action.
My colleague Marija Matić mentioned a few in her Weiss Crypto Daily on Monday. These include …
- Bitcoin’s halving,
- The potential for an Ethereum (ETH, “B+”) spot ETF approval as soon as May,
- The launch of several highly anticipated new crypto projects, and
- The release of the latest inflation data.
So, here’s the good news: This pullback is not just expected, it's potentially healthy for the market.
Corrections weed out short-term speculators and cool down overheated markets. Even if Bitcoin dips further to $50,700, the long-term bullish trend will likely remain intact.
And here’s the even better news: This pullback also offers an opportunity to load up on your favorite crypto … before the rally turns investor sentiment into a frenzy and prices surge past attainable entry levels.
To maximize your potential profits even more, savvy investors may also consider targeting smaller cryptos that have the ability to outperform due to their insane growth potential.
This is a riskier strategy than just sticking with market leaders like BTC or ETH because smaller projects means more exposure to market volatility.
But it can pay off with gains of 2x, 9x or even 10x in a crypto bull market.
And my colleague Juan Villaverde even has a strategy that helps turn those already impressive gains into potentially 20x, 344x and even 816x winners.
He broke down the details of that strategy in a recent briefing with Weiss Ratings founder Dr. Martin Weiss.
Now, that briefing has been made available to you, as a thank you for being a Weiss Crypto Daily reader so you can act now, while the timing is right.
But I suggest you watch it sooner rather than later, as we’ll be taking it offline soon.
Best,
Beth Canova
Crypto Managing Editor
