Has Bitcoin triggered a magazine cover indicator buy signal?
|The ‘magazine cover indicator’ is the belief that by the time an instrument reaches the front page of a major magazine cover it is a contrarian indicator. So, if the front page of the magazine speaks about a great bull market, is it a time to sell? If the front page speaks of a great bear market is it a time to buy?
Professional analysts and traders will know this from personal anecdotal experience. By the time one of the non-trading friends or family speaks about a certain investment the market is usually saturated and about to reverse. It is a strange counterintuitive phenomenon that when everyone says ‘buy’ it can be a great time to sell. Why? Because saying ‘buy’ has probably already been bought. So, here is the latest ‘Economist’ front page titled ‘Crypto’s Downfall’.
So, is this a contrarian signal that suggests buying Bitcoin may actually be a good move? Brent Donelly had a look at the validity of the magazine indicator and you can check out his helpful piece and the criteria he used here. The summary of his results was as follows; his research found that the magazine cover indicator was a decent reversal indicator.
The latest cause of crypto angst has been over the collapse of the FTX exchange. This has led to a big crisis in crypto confidence which has brought voice to crypto cynics, concern to neutrals, and grime resolve for holders. The point of this article is not to argue for or against Bitcoin in principle but to recognise we may be at peak bearishness now.
If the USD has peaked, a weak USD tends to help Bitcoin higher. So, with BTCUSD around its 100EMA on the monthly chart will it hold?
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