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Bitcoin - Price Behaviour

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Guest Allen

Hi I am very new in this forum but I have to say that it is very informative, I would like to buy Bitcoin ( living in UK) but I am not sure how to start , it is a lot of information about it out but just confusing me. can you please let me know how to start in a play english language.

many thanks

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Dear Guest Allen,

No one using IG's platform is actually physically buying Bitcoin. We are all trading Bitcoin using CFD's or Spread Betting based on price movement. 

You can trade other Cryptocurrencies too using IG's platform. I am going include a link below to get you started.

https://www.ig.com/uk/cryptocurrency-trading

What worries me is that based on your post it is clear that you have very little idea in this area yet you have managed to somehow get yourself on IG Community!

Do you invest or trade? If the answer is no then I would seriously advise you not to go anywhere near physically acquiring Bitcoin or physically acquiring any Cryptocurrencies. I would also strongly suggest you do not even consider trading Cryptocurrencies if you do not invest or trade currently or have not done so in the past. That is my personal advice but of course you must make a choice and decision which is suitable for you. 

Before you do anything or make an informed decision please take some time to read, research, analyse and do not rush into anything. 

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So the US has reduced interest rates after 11 years. This surely means an increase in the supply of US Dollars? Central Bank manipulation is what pro Bitcoin supporters thrive on. 

Lower interest rates could lead to capital flowing into more riskier assets and there are no assets more riskier than Bitcoin. So this could indirectly be good for Bitcoin as its supply cannot be manipulated. 

Of course the price behaviour of Bitcoin going forwards will tell us whether this narrative is supported or not.

For now it seems like further downward pressure for Bitcoin. 

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Bitcoin has two major hurdles to pass for me. The first is above $11k and the second is above $12k. Until these price events occur, Bitcoin, for me still has a more downward bias or should I say a stronger downward bias. 

 

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What is interesting with Bitcoin's current price behaviour is that it is trading above its 20, 50, 100 and 200 DMA's. I include the chart below:

Bitcoin_20190803_09_19.thumb.png.261e13be60b8de2655228c1c826eb38a.png

The fact that the 50, 100 and 200 DMA curves are sloping upwards is a very bullish sign that Bitcoin is trending upwards strongly. The 20 DMA curvy is sloping downwards which is signalling short term bearishness and that the short term trend is downwards. Now one must remember that these are 'time lagging' indicators and therefore the price will turn before and changes are shown on the chart like above. Once the 'green' 20 DMA begins sloping upwards then it is the green light that Bitcoin has resumed its aggressive upward bullish movement. 

Those who follow the price action of Bitcoin like a hawk will spot and be able to trade Bitcoin well before the 20 DMA curve is shown as sloping upwards. 

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Bitcoin hit $11.6k overnight. 

That one move has put a slight reversal on the tip of the 20 DMA curve on the 'daily'. 

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Bitcoin hit $12.2k so now I think it will attempt the $13k and if it does then I think there is a strong chance it will go for $15k as traders will not want to miss out on the attempt for a new all time high. 

The flip side is it fails at $13k and heads back down. Based on trend strength and momentum one must determine the likelihood of it going up or down. One must see if the odds and probability are in favour towards a move upwards or downwards. Everything else is just noise and a distraction. The price action will give you the confirmation and answer.

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Bitcoin has dropped 500 points today (Saturday). Weekends are where some big moves come in Bitcoin both on the long side and short side. I know some who only trade Bitcoin on weekends such are the rewards of the correct directional trade. 

For those who are long, extreme volatility, is one of the biggest risks. If your stop losses are too tight then you will get stopped out for sure. Then some may find it difficult to get back in. For those who are long from many months ago then these large drops provide an opportunity to add to your position in a bullish medium term trend.

The extreme volatility will test Bitcoin traders to the maximum. If anyone thinks trading is easy then they should try trading Bitcoin. It is just another asset but it is one of the more difficult assets to trade hence why a lot of traders just simply stay away from it. Some traders will have tried and failed. Some dare not trade it due to not being able to apply any trading strategy / methodology.  Others will allow media market 'noise' and others do not believe in the asset class full stop. 

Bitcoin has defended the $10k level and is now desperately trying to defend the $11k level. There is a battle going on between those going long and those going short. Let us see who wins.  

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If you look closely at the most recent trading range for Bitcoin then it seems to be narrowing. In the past when this tends to occur then the price either breaks sharply upwards or downwards depending on the demand side for buying or selling. 

Now we have witnessed a recent price rise from $10k to $12k so this current consolidation may be signalling to us that the current bullish scenario is facing exhaustion, well for now at least!

 

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So after all the extreme volatility Bitcoin is still trading above $10k. It is currently at the time of writing over $10450. This tells me that there is support at the $9k price level. $10k is a psychologically important price point for Bitcoin. It is all about confidence, momentum and sentiment. 

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I am not suggesting that Bitcoin will not go down to the $8k or $7k levels as I simply do not know. The question I would like to ask those who are negative or bearish about Bitcoin and those who think it is garbage and junk which will go down to zero, why it has not gone down to $8k or even $7k yet since it went up to $12k? Why is the price still over $10k albeit flirting in the $9k's briefing before returning to above $10k?

Could it be because there is current demand at this price level and not enough sellers yet to take it down to $7k or $8k? If this is the case then why are there not enough sellers to take it down to $7k to $8k level? Oh wait those buying Bitcoin are stupid and silly and oh yes there is market manipulation. Normally the two common arguments presented without a shred of evidence to support it. 

Why do Fidelity want to get a piece of this pie? As a Fidelity customer and I have been for many years I can tell you that Fidelity have realised that its 'High Net Worth (HNI) want exposure to Bitcoin. Fidelity are also looking at offering its clients storage facilities for Bitcoin. Would Fidelity who manage over a trillion of assets world wide really bother if Bitcoin was junk and going down to zero?

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Bitcoin has recently been trading in a narrowing range. This is visible by following the price action and looking at the charts. I am referring to the 'daily' but others may be using different time frames.

To me there seems a lack of conviction between the 'Bulls' and the 'Bears'. Every time the price is dropping below $10k and into the $9k zone it is going back up. Every time it is approaching $11k it is going back down. Volume has declined during August 2019. Now this could be just the lull before the storm with summer holiday time in play. Time will tell. Now based on 'Odds and Probability' I think this will have to change some time soon possibly starting in September 2019. I think either the 'Bears' will win and the price will go towards $14k or it will drop and go below $9k and towards around the $7.5k level. 

For shorter term traders one must look at which way the price breaks out. I know traders will be anticipating one or the other but if it can wait for signals / indicators confirming which way the price is likely to move towards and wait for those confirmation signals before acting. 

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I remember the times when the Bitcoin price saw a floor around the $100 area. I also remember the times when the Bitcoin price saw a floor around the $1000 area. I think what we are seeing now is Bitcoin building a floor around the $10k price area. 

Those traders who have experienced Bitcoin's price behaviour over the many years will be relaxed and calm. They know what is likely to come next though I accept these probabilities can change at any given time based on positive / negative sentiment influenced heavily by the media. 

When I look at the Bitcoin chart 'daily' it indicates to me that Bitcoin is bullish and is trading as if it was in a bull market.  What we may be witnessing is a healthy strong consolidation period where accumulation will take place. 

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Is the current price behaviour telling us which direction Bitcoin is more likely to travel in its next move?

$10.5k was hit overnight. Today will be interesting.

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Bitcoin is still trading at around the $10.5k level. I have stated in the past that these corrections and consolidations are healthy for Bitcoin and necessary. It helps to build the foundation for a sustained move upwards in a bull market. 

If you look at where the Bitcoin price was on the 1st January and where it is now then the returns and performance are still nothing short of exceptional. Traders get stuck in daily price moves on Bitcoin. The volatility is high for Bitcoin but one must not lose sight of how Bitcoin has performed over the past 12 months. 

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Bitcoin is currently trading around the $10.3k area. It is showing a very strong consolidation and range bound phase over the past two months or so which in its own way could prove to be a early bullish indicator. Bitcoin has not gone down to the levels predicted by the 'experts'. It has still not gone down below $8k, $7k or even $5k since its recent upward move towards $12k.

The question is why not? Could it be that there are not enough sellers at this moment in time? Could it be that a battle has taken place between 'buyers' and 'seller's and the 'sellers' cannot beat the 'buyers' at this moment in time? Could 'demand' and 'supply' fundamentals be playing a part? Could the upcoming 'halving event' be playing a crucial role in Bitcoin physical acquisition behaviour? There are lots of questions but for now Bitcoin is still proving strong in its quest to remain above the very important psychological level of $10k. 

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Apparently Bitcoin has entered its fourth parabolic phase. I have stated on many occasions in the past the one must not fear bubbles but embrace them as they provide the best trading opportunities in one's lifetime. 

Just have a look at the four previous bubbles for Bitcoin (below). I don't recall the 'tulip mania' having four or more such bubbles. 

Date Bull Market Top Percentage Change
April 2011 $0.80 N/A
April 2013 $259.34 32,317.5 percent
November 2013 $1,163 348.85 percent
December 2017 $19,666 1,590 percent 

Tops of every bitcoin bull run. | Source: Weisscrypto

So what do you call an asset that has already apparently had four bubbles and a thousand deaths? I call it an asset that refuses to die. If Bruce Willis is looking for a replacement in the Die Hard franchise then Bitcoin could just be perfect replacement.  😂LOL. 🔫⚔️🔪🗡️

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@AbDXB1345,

I think Bitcoin is due to rise and catch up with some of the alt coins recent rise at some point.

It is defending the $10k area remarkably well. Every time it has briefly gone below into the $9k area, it has bounced back above $10k quickly and strongly. 

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Well Bitcoin is more or less at the same place as 9:00 pm last night. It is 5:00 am and no real major move overnight. 

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@TrendFollower the range is still holding strong and yesterdays candlestick shows that the bulls won the battle, so lets see if this is the start of the break out of the range on the upward side!

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@AbDXB1345,

Yes I agree. The range is still holding strong. Even if the start of the break out is on the downward side then that is fine as you can consider a 'short' position. Trends are not always upwards. They are downwards too. Those who do not trade on the short side miss out on lots of potential gains throughout the year.

If it was not for the halving event, then looking at the 'daily' I would be thinking that Bitcoin was more likely to go down. I think the halving event and all the fanfare and online media attention it will get nearer the time makes me think Bitcoin will be news driven until the halving event and then I expect a major correction of gigantic proportions. 

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Parabolic SAR is a tool / indicator which I find very useful. For Bitcoin it would indicate a 'short' signal but I would still not feel comfortable shorting Bitcoin right now. 

Bitcoin_20190921_11_38.png.b99c968ced1497a48d65abcbbcdc9fe8.png

It is trading on the 'daily' below its 20, 50 and 100 DMA though it is above its 200 DMA but this could also indicate a short position on Bitcoin. Again I would still not feel comfortable shorting Bitcoin right now as it's price behaviour currently is not trending strongly downwards. 

Bitcoin_20190921_11_40.png.3ff9a3733a505fd3ef255ec24772b7b3.png

This is where technical analysis can be dangerous as if we follow technical signals and indicators alone then it does not guarantee a successful or profitable trade. 

In my experience, Bitcoin et al, can move / reverse sharply when one thinks it is going move in a particular direction based on technical signals and indicators. This is why a lot of excellent and experienced traders who have mastered technical analysis still struggle to trade Crypto's because text book theory goes out of the window. Bitcoin for me is still news driven. Positive and bullish news will lead to bullish price behaviour and negative and bearish news will lead to downward price action. 

Sentiment also plays an important role. It is no coincidence that during this recent sideways and range bound price behaviour in Bitcoin that Google has seen searches for Bitcoin decline.

Now if you look at the momentum indicator then it is supporting the current narrative of range bound and sideways trending price behaviour of Bitcoin. The momentum is not demonstrating that a long trade or short trade is on. 

Bitcoin_20190921_11_44.png.1308224df7be4b592ea22f89f771afef.png

 

Even if you look at volume then again it is in line with what I would expect to see on such price behaviour for Bitcoin.

Bitcoin_20190921_11_47.png.f18610b6b131775b81360704d834d427.png

Sometimes the best trade when trading Cryptocurrencies is not to trade when we are seeing such price action. It is not currently the strongest trending asset. There are other assets which are trending stronger. There are other Crypto's which are trending stronger. Bitcoin along with Bitcoin Cash and Litecoin were some of the strongest trending assets earlier on in the year.

From an investment perspective if those who think Bitcoin is going to continue upwards then they may see this as an opportunity to top up their investment but from a trading perspective I think it would be prudent to wait for a clear breakout and upward revival of the longer term trend before participating a trade in this asset. This is using the time frame of 'daily'. Those who use shorter timeframes may have different ideas so it would be interesting to see what they think.

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