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Bitcoin - Price Behaviour

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@AbDXB1345,

What time frame are you using? I tend to use the 'daily'. The 200 DMA was breached and then the price went back above it on the 'daily'. This is the problem with setting stop losses on technical indicators such as the moving averages which are so common that a lot of traders set them around them. The markets and institutions know this. 

For me news is a big driver in Bitcoin and other alt coins but on this occasion the specifics begin the sharp and extreme move down could not have been anticipated by the small retail traders. This is the big risk in trading Crypto's and why a lot of good and experienced traders stay away from it. It is not for everyone.

I would not suggest Crypto's unless you have a high risk tolerance and have a good amount of capital. The margin requirements are pretty premium when compared to other assets but the potential points reward is also greater due to the volatility.

Try being patient and waiting for Bitcoin to pick a strong direction and then trade in that direction. If you are going to trade right now then the only trade is 'short'. Do not try and go 'long' and trade against the current trend in my opinion unless you are an expert day trader at Crypto's. 

I think there is going to be a big move in Bitcoin ahead of the halving event. Exactly when this will be I don't know. That is going to be the trade to participate in if you have limited capital and limited experience of trading Bitcoin. Crypto's can turn at any given time which is why they are disliked so much and why they remain ultra high risk. 

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@TrendFollower I trade daily charts, with longer term positions proving to be better for me. 

I think you are right, best to wait for an established trend and then get onboard instead of waiting on the fence hoping for the direction to favour my position.

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@AbDXB1345,

Well stated. 👍 I could not have put it any better. 

If you just take a position based on emotion, personal thoughts, personal judgement, etc. then you are relying on 'hope' and 'luck' that the price follows your personal opinion. Unfortunately, markets do not follow small retail traders. Markets are ruthless. Hope and luck are not words you want to use in trading. They are bad words and one must avoid them. 

This is why when trading Crypto's I only try and trade them when they are trending strongly in either an upward or downward direction (like now). I have day traded Bitcoin and other Crypto's in the past but due to my work commitments as I work full time, I just simply do not have the time. I did make some really good profits per day but it was mentally exhausting though rewarding. I need to trade Bitcoin et al in a way that allows it not to interfere in my time and work during the day. This is where adopting trend following principles comes in. I too also trade longer term positions based on trends. 

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It is being reported that Bitcoin even after its recent drop is still the best performing asset in 2019 to date. I accept there are still a couple of months to go and even if another asset was to outperform it in the next couple of months it would still be one of the highest performing assets in 2019. 

 

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So it seems Bitcoin is experiencing a breakout.

For me the recent consolidation was not long enough. However, this is Bitcoin and it has not stopped Bitcoin before in making a sharp move when the market least expects. 

This is precisely why it makes trading Bitcoin and Cryptocurrencies in general so difficult to trade and certain text book theory is extremely difficult to apply. 

What I now want to see is whether the current breakout in the price of Bitcoin leads to a strong trending movement. 

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For me the downside risk of any rally is still the possibility that Bitcoin goes down to the $7k levels.

Earlier on I did not think this was going to happen but it just shows that even Bitcoin is resorting to 'text book' technical analysis rules. My assumption could still be proved to be wrong and the price action will confirm this one way or another. 

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I wouldn't say rules there @TrendFollower.  TA is merely a way to visualise price action by mapping market participants sentiment as expressed in the price action.  It puts price action into a context such that one can see a breakout or a potential trend change, or continuation, building and select an appropriate entry and stop point.  Bitcoin, and any market for that matter, is gonna do what it's gonna do, which will be driven by sentiment.  Perhaps we can say that sentiment is driven by fundamentals but good old fashioned greed and fear are also big factors, especially with markets more prone to speculation.

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@Mercury,

I would add that TA is merely a way to visualise 'historical' price action.

I think for Bitcoin, sentiment is driven by positive or negative news as it is still very difficult to value Bitcoin compared to other more traditional assets. Yes there is a limited supply of 21m and yes it is worth what someone is willing to pay regardless of whether it is worth that much or not. 

My view is that the 'whales' will buy and drive price up prior to the halving event next year. That is my assumption and the price action will either accept or reject my assumption. The the 'Big Dump' will come where profits are taken and the herd are left nursing losses.

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Not sure how one would visualise future prices...  The whole point is to put likely scenarios into historic context (i.e. we have had a deep bearish retrace therefore a bullish phase may be coming, how do you see that).

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@Mercury,

So historical price action is one part of the information which can go into the 'decision basket'. Another can be news being released both positive and negative. One can also have a 'gut' feeling or 'instinct' on a trade which can also go into the decision basket. You can also make 'assumptions' based on your knowledge and experience and this too can go into the decision basket. This can be used to 'visualise' mentally how you think the future prices could look like. Of course there is no guarantee but when we make a trading decision based on various factors what ever they may be (different traders will have different factors) we are visualising future price action. Whether this visualisation becomes a reality is determined by how the price behaves and ultimately the price action going forwards once the trade is initiated. 

So to put this into the context of Bitcoin. I have visualised the future price action of Bitcoin as increasing prior to the halving event in 2020. I am making an assumption which the price action is going to test. I am visualising future price action. Elements of this visualisation are based on historical price action. So for example how the price of Bitcoin has reacted to prior to previous halving events. Of course there is absolutely no guarantee that Bitcoin's price will behave the same way prior to the next halving event but trading is based on 'odds and probability' and one could argue that based on the information we have and what we have experienced when it comes to Bitcoin then could be more than likely that Bitcoin could repeat a similar pattern. I don't necessarily think the this is a given but based on the fact that Bitcoin has not crashed or gone $1k or even $2k suggests that there is likely to be another mighty rise before the next mighty fall.

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The price behaviour of Bitcoin could be described as erratic. I don't think it helps that there is uncertainty around the globe on whether the asset should be a commodity, security or currency. This certainly does not help. Also regulation is slow across the globe too and even this differs depending on the jurisdiction. 

Until these things are resolved the price of Bitcoin is going to behave erratically and continue with the extreme volatility we have seen. 

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Personal View on Bitcoin - At Present (This may well change as time passes)

The problem I have with Bitcoin is that I can see it making a play towards its all time high based on a historical pattern of halving events and limited supply arguments.

However, such is the nature of Bitcoin that I can all see it come crashing down also based on historical patterns and lack of appreciation, value and understanding. Speculation is rife in this asset class and for Bitcoin specifically. It is speculation that will drive prices down sharp and quickly. 

One of the things that would change my mind is if there was serious regulation in the US and UK in relation to Bitcoin and Cryptocurrencies. Another is if India changed its stance on Bitcoin. One important thing could be if the US approved a Bitcoin ETF. These things would change the landscape for Bitcoin to change historical patterns which have played out in a similar fashion. Until this happens I fear we could see similar patterns playing out in the future.

I think Bitcoin is going to make a play for $20k. I have no idea if it will exceed but it could easily do so. Once we are closer to the halving event then I see large profits being taken and a massive drop coming in Bitcoin because there will be a long time before there is another halving event. The only thing that could change this is if any of the things in the above paragraph in blue happened. If not then I see a major downside move in Bitcoin. 

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I think Bitcoin needs to go above $10k and every day it now remains below $10k given an increase in the chance that the next big move is downwards. This is based on my personal experience, gut feeling and instinct. One needs to see Bitcoin aggressively drive past $10k for there to be this 'big' move some of us are expecting (including me) that will take Bitcoin above its all time high before it comes crashing back down. 

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Let's just say that Bitcoin now tumbled down to $7k or even $5k. Those who have been following Bitcoin over the past many years have seen such falls constantly. The way Bitcoin operates it would still be capable of making a new all time high from that position. 

It is not impossible in my view that Bitcoin can be amended, upgraded and improved to make it an even stronger and better asset. If this were to happen and there are some extremely clever minds at work on this then would it not stop Bitcoin crashing to zero?

This is where an understanding of the underlying technology behind Bitcoin, Blockchain, comes in. I just simply do not see Bitcoin crashing to zero this year or next year. If it does then I will be wrong and I am fine with that. Too many large organisations are now getting involved with Bitcoin who had not say 3 years ago or even 5 years ago. I think many others will join the journey so this Christmas 2019 should be an interesting one.

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I think there are going to be 'TWO' trading opportunities for Bitcoin in the next 12 months. This will require 'patience' and 'discipline' not to dabble or trade for the sake of a bit of movement on the price action. 

Once the current corrective phase is completed I am 'anticipating' a bullish move upwards prior to the halving event in May 2020. There is a 'long' trade potential here.

The second opportunity will be to 'short' Bitcoin either just prior to the halving event or after depending on potential sharp trend reversals. There is a 'short' trade potential here. 

So traders only need to be looking at trading Bitcoin twice in the next 12 months for some serious profit potential. This could be more than trading another asset every other day or week and majority of the trades being losing trades. Even if the majority of the trades are winning trades it could be that the losses on the losing trades are greater than the profits on the winning trades.

Of course there is no guarantee that my anticipation will be correct. I could be proved wrong as a different pattern and different scenario may play out catching a lot of traders off guard. The only thing one can do is to keep following the price action so that one is ready should the opportunity arise. 

 

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There are going to be some serious implications to anyone who was short not only Bitcoin but other Cryptocurrencies and were trading naked without a stop loss. 

In my personal experience and I have posted this several times that some of the biggest moves in Cryptocurrencies come from late Friday evening UK time to early Monday morning UK time. 

We have seen Bitcoin rise sharply. In fact very sharply. There were obviously a lot more buyers than sellers at the support zone which Bitcoin was hovering around and it did not take too long for those buyers to enter and drive the price up rapidly. Next week should be rather interesting. Apologies from 12:00 pm should be rather interesting. 

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Bitcoin has seen one of its sharpest rallies and I think one of it biggest daily gains since around 2011 if reports are accurate. 

There are times when Bitcoin can react in totally the opposite way to how the mainstream media and markets in general are reporting about the asset. Again I have seen this narrative play out far too many times. Whilst Bitcoin has buyers and there is demand then it will not be going to zero any time soon. Yes there will be large price drops and crashes along the way but ultimately I envisage Bitcoin making new longer term 'higher lows'.

I do not think we are going to see $1000 any time soon but this is what the price was only two to three years ago. Once traders understand and appreciate the type of asset we are dealing in Bitcoin then it will become easier from them to both understand and appreciate the price behaviour rather than jump to bearish conclusions and hold constant negative sentiment even when we are seeing such moves materialise. 

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If you look at the 'Awesome Oscillator' then it has just turned above the line and above 0 on this latest bullish move. This in itself is a bullish indicator. 

Bitcoin_20191027_09_31.png.317f7d0a0e594f8a9f5283717bd3959f.png

This could indicator a change of momentum for Bitcoin. I know traders who would use this in their 'decision making basket' as one of several signals when looking at potential entry points. 

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At the moment short term momentum seems to be rising faster than the long term momentum. Now like I suggested in my previous post (above) I know some traders may use the crossing of this above 0 as a potential opportunity to go 'long'.

It is certainly something that is worth considering along with other factors of course.

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@Mercury,

I would be surprised if Bitcoin does not finish above $10,000 shortly. It has strong momentum and we have just witnessed a strong bounce / breakout that has been seen across the asset class in relation to the 'alt coins'. I think it did actually surpass $10k over several exchanges on Friday night / Saturday early morning if reports are to be believed but it was not able to close above it.

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Bitcoin has hit $9.8k so far so it is getting very close to that psychologically important $10k price point.

If you look at the 'Pivot Points' on the 'daily' then you will see how significant this rise could be. 

Bitcoin_20191027_17_40.png.af93e28136f47e88eafba6dc915392a7.png

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Bearish scenarios being reported are a fall back to $6k - $8k range. 

Bullish scenarios being reported are a rise to $12k and then $16k. 

Bitcoin will need a strong narrative. China has started the ball rolling but this by itself will not be enough as it relates more Blockchain than it does Crypto. There will need to be some very positive news in relation to Bitcoin specifically which supports the price action other wise the move will not be sustainable in my personal opinion. 

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Certain indicators like the 'RSI', 'Stochastic' and 'Detrended Price Oscillator' are showing potentially overbought signals. This in itself does not mean that the upward rally will not continue but it is something to be aware of.

There may be sharp pullbacks along such a rally which could lead to tight stop losses being triggered. This is especially important for those who are not day trading Bitcoin. 

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If we look at history then Bitcoin tends to start motoring around six months prior to the halving event. Now this does not mean this will happen on this occasion but if there halving event is in May 2020 then by my calculation which should see some serious price action around December 2019. It may be earlier or even later than this but around this time.

 

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This is BIG NEWS!

Starbucks Will Accept Bitcoin in 2020, Thanks to Wall Street’s Bakkt

https://www.ccn.com/starbucks-will-accept-bitcoin-in-2020-thanks-to-wall-streets-bakkt/

Why are Starbucks even considering this if Bitcoin was going to crash and go to zero because it was junk? If others like McDonalds, Amazon, etc. all follow suit then Bitcoin could go through the roof. 

Now one thing to note is that Starbucks will not accept Bitcoin for a cup of coffee but instead allow payment by Bitcoin so that it can be coverted into US dollar at the point of sale. This is the first stage and a necessary stage to get people buying coffee using Bitcoin. If they can establish this payment space in the years to come then who knows what will happen. It is all about changing the payment behaviour of the consumer and if you do not try then you do not get. This could take many years so patience will be required. If it fails then so be it but at least they tried. They must see an opportunity in certain US states and especially in Asia. 

Starbucks to test digital asset app from Bakkt

https://www.finextra.com/newsarticle/34660/starbucks-to-test-digital-asset-app-from-bakkt

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When looking at the 'daily' then Bitcoin is still technically in a downtrend. For me Bitcoin would need to close above $10.8k and stay above it for my view to change. 

Bitcoin_20191030_05_28.png.e21112081a28717bd2745f9c8ad44a86.png

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I was reading an interesting article today which highlighted that Bitcoin has outperformed Gold every single year since 2011. So for the past eight years. These eight years have seen wars, economic turmoil, political uncertainty and many other things. Bonds have gone up, Cryptocurrencies have gone up and so too has Gold but Bonds and Crypto have gone up more than Gold.

I think a lot of traders are anticipating a rise in the price of Bitcoin which is expected to go towards its recent all time high. Whether it surpasses it or not none of us know for sure. When this will happen is the difficult thing. None of us can accurately predict when Bitcoin will go above $10k, $12k and $15k. Timing is key and timing the market is one of the most difficult things. This is one of the reasons why I adopted trend following principles. It made is easier for me to trade without getting the timing exactly right. That takes an extremely high level of skill which is rarely seen in retail traders. Those able to do that are some of the finest traders in the world who are millionaires / billionaires or certainly manage millions and billions of dollars / pounds of capital. 

Bitcoin still is showing a risk that it could go back down to $7.8k or even $7.5k and test that level before any major rally. Or it could simply start rallying from tomorrow. This unpredictability in Bitcoin is what makes it one of the most challenging assets to trade but also one of the most potentially rewarding in terms of points per £. 

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Bitcoin seems like it is getting ripe for another breakout to the upside but things can change and turn quickly.

Bitcoin_20191104_21_10.png.baeefd24e23b25d5ccdc2d3ea7d58e87.png

What is interesting is that Bitcoin according to the 'RSI' on the 'daily' is not at overbought levels yet so any upside move does have legs. 

Bitcoin_20191104_21_11.png.62a0073ca0ffc765e2d4f59de60a4a5e.png

Ideally on any strong rally you want Bitcoin to be seen at overbought levels. It seems to be heading that way but with Bitcoin the price action can reverse so quickly in the space of hours overnight meaning trying to work out 'timing' is extremely difficult. 

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It seems there was a 'flash crash' in Bitcoin on the CME Futures. Gap Filled!!!

You just cannot take your eyes of Bitcoin and this is precisely the reason why I do not like very short term trading on Bitcoin unless you are on it constantly minute after minute. 

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Bitcoin's price range is narrowing which makes me think either it is going to explode on the upside or equally on the downside once the next direction is decided. 

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