Scott Phillips: A watched kettle never boils

The psychology behind trending markets is pretty easy to understand.

OMG OMG OMG Unless I buy this stock RIGHT NOW I’ll never get in and it will go to 1 million dollars and everyone will be rich but me and I’ll DIE from the shame.

I know it’s stupid but that’s the way we are wired. Blame your DNA.

The psychology behind sideways periods is far more difficult to understand but it’s essential we get a handle on it.

Bitcoin is at a fascinating juncture here, and what happens next will decide it’s future.

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This is best thought of as a brutal war of attrition.

An in the trenches, everybody dies type affair.

See how each attempt by the longs is getting weaker and weaker? That’s obvious but the selling legs are getting weaker as well.

Both sides are just standing from sheer willpower at this point.

The two strongly held views are literally incompatible

“Bitcoin is the future of money” and “Bitcoin is a scam, they are magic beans”.

Eventually one side or the other is exhausted and at that point the market will choose a direction.

If the bulls are left standing the traders who sold out in the last 6 months will be forced to chase the market as it runs away without them… waiting for a pullback which may not come.

If the bears push it down just a little more, then everyone who was planning on buying bitcoin will have already bought over the last six months. So there will be no more buyers. No more buyers and plenty of sellers will kick off a catastrophic decline.

From the Price Action Masterclass we know that extremes of both low and high volatility are unsustainable.

Look at the top in December. That’s an extreme of high volatility. And now we have an extreme of low volatility.

It’s no accident that the time of us going sideways is roughly equal to the previous trending time. Long enough that we can disregard the effect of the previous trend.

Now, let’s look a little deeper. We have a very small range inside bar setup. We also have a monthly retest variation buy setup.

Wait for it to start happening, but if this starts to pump, it should move hard and fast.

Scott