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Bitcoin - Price Behaviour

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Well let's agree on one other thing @TrendFollower it is going to be fascinating watching it all unfold.  Having been through the internet bubble, but being too young to enjoy it, I am going to enjoy the next few years as things play out but from the sidelines on crypto.  I will keep my hard earned acorns for other markets, and there will be plenty of opportunity of that I am sure.  Just need to identify that opportunity and get in safely...

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Great convo guys, I too remember the dot com bubble and the parallels with crypto are indeed interesting.

Amazon and e-bay were definitely dot com babes born in the mid 90's. Can't remember Amazon's IPO price but remember price rocketing up to $100 a share, could you imagine buying 100 Amazon shares at $100 each - then watch them collapse 90% down to $10. What would you do? All around dot com companies are going bust, do you hang on to them? Knowing what we know now the thought is both scary and funny at the same time.

Blockchain will need at least 1 but maybe as many as 5 digital currencies to operate, what they will be and if they are even born yet is the puzzle.

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@Caseynotes, yes I agree with your last paragraph. 

Past performance is not necessarily a 'given' to repeat itself but it we make the assumption on Bitcoin that it does then on every major correction since inception Bitcoin has gone to make all time higher highs. That does not mean it will behave in this manner going forwards. However when it suits, historical data is important to form 'technical analysis' strategies and signals. The historical data on Bitcoin tells a 'narrative' albeit historical and there is no guarantee that it will behave the same going forwards. 

I have seen Bitcoin die a hundred deaths and it is still here. In fact we are more closer than ever to institutional investment in Cryptocurrencies, more user cases (albeit slow) than ever, more exciting projects than ever from a Blockchain and Tokenisation perspective. 

The comparison with Tulip Bulbs is not a fair one. How many use cases did Tulip Bulbs have? How important were they to the world? Digital currencies, digital payments and the use of Blockchain for international transactions has a major potential across the globe. We are talking $trillions. The Dot.Com era saw was a large correction weeding out the garbage. That is exactly what we are seeing in Bitcoin and Cryptocurrencies and it is extremely healthy. I welcome it as it will make the asset class far more stronger and resilient going forwards just like 'Tech Stocks' are now. There are some wonderful technology companies which have emerged and produced price / profit gains to simply admire. 

We are also getting close to forms of regulation based in certain jurisdictions. Bitcoin and Cryptocurrencies are in a far more healthier position than in the past and they have ever been. People are using the price action to form their opinions on the asset class rather than the behaviour within the asset class itself. There is a lot of 'rubbish' in the media about Bitcoin and Cryptocurrencies so the sources need to be credible and reliable. 

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Well the reverse is true as well @TrendFollower, people are using the price action to form their opinion that Crypto is set to make another "all time higher high".  The comparison with previous bubbles that I made is not about the intrinsic value, or otherwise. of the asset the bubble was based on but rather the psychology of investors in a mania.

On the way up there is incredulity that such a thing could be getting anyone interested.  Then as it gathers pace people start to believe the hype and jump on board (FOMO). Smart money gets out and the 'Jonnys come lately' still believe the hype ("it's going to $100,000!) so they hold on, despite a clear 'get the hell' out signal.  As they sink further into the red they have to believe there will be yet another all time high to get them out of the doo doo.  But the chart tells a different story, really it just does.  You can look at hundreds of similar cases on individual stocks, it doesn't have to be the Tulip mania, that is just a well known example of the phenomenon.  Can anyone truly say now that Crypto was not a bubble?  I mean really, just look at the chart..!

The more interesting question, as @Caseynotes also said, is what happens next.  You believe it will be Amazon.  I believe it will be Boo.com.  Both examples exist.  The only thing we agree on is that crypto, of some version of the technology, will emerge from the ashes and become mainstream.   I have already explained the fundamentals of my reasoning for how I think this is more likely to happen (not will, is more likely, who really knows?).

Let's take it back to what the forum is about, trading strategy:

  • I am happy to watch this from the sidelines, I will not trade the current Cryptos neither Long nor Short - reasons previously explained (elsewhere), there are better markets to earn a buck on.
  • I wound consider an investment in the new evolution of crypto, if I was able to identify it, but not until the dust of what is coming next has settled (this is the Google model really...)

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@Mercury,

Price action would be current price behaviour. Past price behaviour is what some may be using to form an opinion of say Bitcoin making an all time higher high. My view on this is that I simply do not know what is going to happen in the future and past price behaviour and trends do not always lead to correct future assumption whether that be Bitcoin or any other asset. 

If Bitcoin's rise to $20,000 was a bubble then what about Gold's rise to $2000? It has never seen such heights since. What about Natural Gas's famous rise before the financial crisis? What about Oil's famous rise during a similar time period? These so called 'bubbles' are just mere exaggerated speculation using large doses of leverage. Bitcoin just happened to get a lot more media coverage worldwide than other smaller bubbles. But so what if it was a bubble? That is fine. Those with stops losses and sound risk management should never worry about bubbles. It is part of the trading environment. One must embrace them as these bubbles provide huge profitable trades in a short timescale. 

No I am not stating that Bitcoin will be the next Amazon. I am merely using Amazon as an example of why one must keep an open mind on what is possible.

I am extremely passionate and enthusiastic about the Cryptocurrency, Blockchain and Tokenisation area as well as Commodities so I can justify my time and efforts to post on such threads and will continue to do so as when I have time. You clearly do not intend on trading Cryptocurrencies either long or short and if your view is that there are better markets to trade then your time will be appreciated on those threads for those markets where you can offer your thoughts on trades that you actually end up trading.

You make a very good point and as I started this thread I think I need to take it back to the 'Price Behaviour of Bitcoin' as the title of the thread suggests. Thank you very much @Mercury for just reminding me of this as I think I myself got sidetracked in discussing things with you that are not necessarily related to the price behaviour of Bitcoin. 👍

 

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Right now may I ask if anyone else is shorting Bitcoin from the IG Community?

If so then what are your thoughts about the psychological $3,500 area? Is that where others are setting their stop losses? I think if Bitcoin did hit $3,500.00 then there could be a large reversal at that stage closing a lot of shorts along the way.

I am not asking for predictions on how much they think Bitcoin will go down. I am asking for those who are shorting Bitcoin about their stop losses and where they have set them and those with live trades, how far they think Bitcoin will go down.

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Guest Phil
10 hours ago, TrendFollower said:

Right now may I ask if anyone else is shorting Bitcoin from the IG Community?

If so then what are your thoughts about the psychological $3,500 area? Is that where others are setting their stop losses? I think if Bitcoin did hit $3,500.00 then there could be a large reversal at that stage closing a lot of shorts along the way.

I am not asking for predictions on how much they think Bitcoin will go down. I am asking for those who are shorting Bitcoin about their stop losses and where they have set them and those with live trades, how far they think Bitcoin will go down.

Oh God the thought of trading bitcoin on a leveraged account is a difficult one for me. You would have to trade very very small I think and make sure that you have room to "breath" as it's volatile enough as it is. I would like to see a bit of good news come out of the cryptocurrency camps and the developers. Something to spark a bit of interest in the technology once again like we had a couple of years back.

Are you a short trendfollower?

Cheers

Phil

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Some of the things you mention I would consider bubbles, like Oil, which was predicated on the "Peak Oil" theory and forgot to consider alternative fuel sources (or more correctly discounted these are outliers with no hope of actually challenging oil, hmm...).  I don't know anything about natural gas.  There was a bubble in hard commodities like copper driven by runaway property speculation, China etc, in turn whipped up by central bank policy, and the same could be said for the current stocks bull run, in fact I have said this so clearly I am not saying Crypto is the only bubble out there.  Regarding Gold I have posted the chart below before, which clearly shows that inflation adjusted gold prices were higher than the 2011 peak you referred to so maybe Gold is not so much a bubble as a storm warning, I believe we will see gold prices exceed the 2011 peak in due course.

So my point isn't that Crypto is a bubble and other markets are not, as you suggested, rather it is that Crypto is a mania.  The other markets you mentioned are well established and not likely to be come defunct any time soon.  Can you say the same for Crypto?  The Tech market of 2000 was not entirely the same as Crypto, people didn't say tech was a bad idea, just that the bubble was, so it had to implode to continue but it was companies looking to leverage technology within the existing business parameters that won out rather than the crazy "big business" disruption plays.  It is for this reason that I conclude that while the technology and ideas behind Crypto may survive but taken forward by the mainstream (i.e. governments and banks etc to operate fiat currencies electronically) the current crop will die off to make way for this because the underlying ideology of replacing government backed currency is bogus.

But ok you don't want to hear anything that disturbs your world view, I get that, only the point of these discussions and forums of this nature is to hear other views surely?  And maybe to consider that there are other outcomes than the ones we might be getting tunnel vision about.  Anyway never mind, as you say I am not trading nor investing this market so if no one wants to discuss alternative views I will refrain from giving my opinion.

historical-gold-prices-100-year-chart-2018-11-21-macrotrends.thumb.png.d016b9ef471616c0635e79463fc7021d.png

  • Thought provoking 1

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@Mercury,

I am trying to take this thread back to trading Bitcoin and its price behaviour as I clearly stated in my previous post and response to you. 

I could say that you do not want to hear anything that does not fit with your views and one could argue that you could have tunnel vision too. Anyway I do not want to discuss such things. There are times when one must have an open mind and embrace the technological revolution we are about to see in things like Cryptocurrencies, Blockchain, Tokenisation, Robotics/Automation, Artificial Intelligence and Internet of Things (IOT). 

I really want to stick to what this thread was about which is Bitcoin - Price Behaviour so here goes another attempt. 

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9 hours ago, Guest Phil said:

Oh God the thought of trading bitcoin on a leveraged account is a difficult one for me. You would have to trade very very small I think and make sure that you have room to "breath" as it's volatile enough as it is. I would like to see a bit of good news come out of the cryptocurrency camps and the developers. Something to spark a bit of interest in the technology once again like we had a couple of years back.

Are you a short trendfollower?

Cheers

Phil

Yes trading Bitcoin on a leveraged account is extremely difficult and anyone who suggests otherwise well...

I think some key drivers for Bitcoin going forwards (I expect something to be announced on these in 2019) are the SEC approving at least one Bitcoin ETF in the US. On top of this institutional money flowing into Bitcoin driving the price up. To support this would be certain jurisdictions approving regulation which is more favourable to Bitcoin.

I am both long and short. Let me explain and I do not suggest others try this at home as it could be dangerous to your health. I 'invested' in Bitcoin when it was around the $2,000.00 area using XBT Provider One product. It is an Exchange Traded Note (ETN). This is of course a 'long' position and with hindsight I would have been wise enough to sell around the $19,000 level but I did not and my profits have diminished but even after such a mammoth drop I am still in profit which is pretty remarkable. This was a long term investment for me. 

I trade Cryptocurrencies and am short Bitcoin using a leveraged spread bet until there is a clear and strong trend reversal. Yes this may sound crazy but I believe long term the new asset class of Cryptocurrencies and I do not want to physically hold any of them in case they do fail and become worthless which is why I only trade and invest in them at this stage rather than physically acquire them. 

I am sure many will think how can you invest in an asset yet short it at the same time. Well let me try and answer this. I invested in Bitcoin a couple of year back but the recent price action has been extremely negative and the most prudent and sensible trade was to short it. I wish I had shorted at $19,000 but I did not.

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Is this current price action merely a relief rally?

In my personal opinion for more shorter time frame traders Cryptocurrencies (with all its volatility) presents remarkable trading opportunities both long and short. Even though most Crypto's have a downward longer term trend in play there are opportunities to profit from short term long trades on the relief rallies, short term trend reversals and volatility. The opportunities do present themselves to day trade or possibly 24-48 hour trades. It is extremely high risk so one must really understanding trading in volatile markets before doing so. 

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I see IG have recently lowered the spread on bitcoin from 50 down to 40 points, still rather high but an improvement. Also more attractive is the recent increase in volatility  since mid November, that last 10 am 1 hour bar was close on 150 points while recent price action between range top and range bottom is around 500 points.

image.thumb.png.c0cf168e276045f372f843b36e74aa3a.png

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@Caseynotes,

Yes they have. IG want to maximise their revenues and profits. I understand their strategy from this perspective. They will be hoping this will entice more traders to trade Bitcoin as the more traders that trade and if around 90% end up losing on their trade, IG are rewarded handsomely. This is why when trading Cryptocurrencies you simply cannot trade against the trend. It is suicidal in my opinion. One must trade with the trend using price action, volume and momentum as key indicators. Moving averages are crucial too and stop losses are a must. 

Have a look at the chart below that I have posted which shows an increase in volume during this very recent price action over the past few days. 

Bitcoin_20181201_13_49.thumb.png.2fe48075bcdf77794310e78a92ff77cf.png

 

 

Edited by TrendFollower

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It seems Bitcoin is heading towards or should I say reverting to its mean (prices before the enormous move to $20k). The price behaviour is supporting my view. 

I just wish I had shorted all the Cryptos available on IG's platform. Luckily I shorted Bitcoin and am still short but it would have been far cheaper in terms of overnight charges and margin required to short the other Cryptocurrencies. I suppose another lesson learnt.

I think this price action will continue until into 2019 where a bottom will be established and then there will be a lot of consolidation, sideways and range bound activity. The rubbish will be cleared, improvements made and the stronger  Cryptocurrencies that survive will begin a new upwards trend. Patience will be required but until then shorting is the only trade available on Bitcoin. 

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Good price move yesterday on the back of Bloomy report that each tether is backed 1:1 by USD

Edited by PandaFace

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@PandaFace,

I would like to see the bottom tested by a 'double bottom' before getting too excited. What we may be witnessing is an amplified 'short covering' rally with new 'long' positions being opened. 

Most of the Cryptos have just crossed their 20 DMA but I would like to see them challenge the 50 DMA and then 100 DMA and 200 DMA. If there is no 'double bottom' then I am not sure how one can confirm in their mind that a bottom has been established and formed in Cryptocurrencies like Bitcoin?

Remember I am positive about Cryptocurrencies but I will try not to go against the price action and let any emotion cloud my judgement where price behaviour is concerned. 

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As someone who follows 'Trend Following' principles the two key indicators I use are 'Price Action' and 'Volume'. A lot of traders will pay attention to 'Price Action' but their analysis will ignore 'Volume'. 

When it comes to trading Cryptocurrencies such as Bitcoin then in my opinion 'Volume' plays a really important part. After price action it is the most important indicator when trading Cryptocurrencies. Even when price action is telling me a 'narrative' and 'Moving Averages' are supporting that 'narrative', I will still look at 'Volume' to confirm this 'narrative'. If the volume is strong then it may well support any assumption that I am making. However, if volume is weak then it may reject any assumption that I am making. 

Volume is actually an underrated indicator in my opinion. When a higher price is supported by low volume, it usually leads to a drop in price rather than the opposite. Using volume to support the price action is a very useful measure when trying to establish the strength of the trend along with momentum. For me if the volume diverges from a trend so that the price action is positive and the price is rising when volume is declining then it tells me that the trend may be getting weaker. 

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I am getting a lot of messages asking what my current view is on Bitcoin. 

TrendFollower = Positive on Cryptocurrencies as an Asset Class (will take time to grow and improve)

TrendFollower = Downward bias on Bitcoin and long term trend still down

TrendFollower = Potential Long trades open for day traders, swing traders and generally short timeframe traders

TrendFollower = Until bottom has been formed on Bitcoin and then tested (double bottom) prices will not begin to rally and long trend upwards will not be formed

TrendFollower = Still possibilities exist for 'Short' positions on Bitcoin to profit from long term trend 

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I do not think the large financial institutions are going to flood capital into the Cryptocurrency markets in the likes of Bitcoin until the price is around the $2k area. 

There will be volatility and rallies along the way but it seems that Bitcoin is heading for the $2k area unless there is a remarkable change in sentiment and capital begins to be invested in Cryptocurrencies by the largest banks, etc. 

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On 19/01/2019 at 23:24, TrendFollower said:

where did you get the 2k from?

 

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@Amirf,

Have a look at the price around July 2017 period and during the drop. Research shows us that 'Bubbles' tend to revert back to mean. Now that does not necessarily mean that Bitcoin must revert back to its mean as it could create a new 'history' for itself but if it was to revert back to its prices before the 'parabolic rise' then it could go into the $2k area.

The truth is I do not know what the Bitcoin price will be next month or next year and the assumption I make will be tested and the results will be known via the price action of Bitcoin. So we are about to find out. 

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  • So Craig Wright is suggesting he is Satoshi according to a SEC filing.
  • Bitcoin is approaching its first month since July 2018 where it could end in positive territory.
  • Is this the end of the bear market in Cryptocurrencies?

At this moment in time the long term trend in Cryptocurrencies offered on IG's platform is still downwards. These rallies in the past have been great in 'suckering' people in. I was one of them when some of my indicators were hit for Stellar and Ripple and I made losses on both of those trades. I have not gone long since from a trading perspective though I am still long on Bitcoin from an investment perspective since the $2000 levels which I executed over two years ago.

Bitcoin needs to cross $4,000 first and foremost before any meaningful discussion or debate can take place in terms of future price behaviour for this asset. If it does not then there is always the possibility for further downside movement leading to another new low for Bitcoin et al.

 

 

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Bitcoin hit $3935.40 earlier today so not far off the psychological $4000.00 level.

The problem is that even if Bitcoin hit $6000 it would still be in a long term downtrend. I think it would need to clear $7000.00 level for any serious rally to materialise and be taken seriously. 

That is not to say there is not a trading opportunity on the long side for day traders and short term traders.

All Cryptocurrencies listed on IG's platform are having a terrific day but we have seen this many times before. That does not necessarily mean that pattern will repeat itself but I would expect a high risk asset like Bitcoin to re-test its low and consolidate its position before any serious move upwards. That said there are no rules to suggest that new history cannot be created on a new asset.

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What is interesting is that Bitcoin has crossed its 20 and 50 DMA's but they are both sloping sideways which suggests a possible consolidation period. It is on the 100 DMA as we speak and both 100 & 200 DMA's are sloping downwards so it is still firmly in a downtrend. 

For me there is no confirmation of a trend reversal yet even though it has been rallying hard over the past few days. 

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I would like to see Bitcoin test $6470 level. 

The one thing to see now is whether the price behaviour of Bitcoin allows it to make new higher lows and new higher highs. 

Though I am not a fan of Gold (disclaimer - am trading both Gold and Silver at the moment) it shows an excellent example of a trend emerging (still in strong play) creating lovely higher lows and higher highs as it trended upwards. That is what I would like to see in Bitcoin but I still fear there could be one more large correction to come. 

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I read a very interesting article today. I cannot remember the source which is frustrating but I hope you all understand with the amount of reading I do full stop! 😴 It can be tiring. 

Anyway made me think about my historical thoughts on Bitcoin becoming the new Digital Gold. The article was stating that Bitcoin will never be able to replace Gold but it may create a special position in becoming the Digital Gold of the Cryptocurrency asset class. There will be so many tokens and cryptocurrencies going forwards that Bitcoin will become the 'Gold Standard' of the Cryptocurrency universe rather than the Fiat currency universe. This notion has legs in my opinion and it has made me seriously question Bitcoin's place as an asset and its value. Its value will be in its stability within the Crypto space in years to come. It is far too volatile at the moment and is not ready to take that mantle but in 5 years time it may well be. 

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It seems Bitcoin is going to go for that psychological $4000 mark which it has failed to break through on the past couple of occasions. The fact that Bitcoin has not dropped and is trying again makes me wonder whether it may do so once the US markets open or overnight and possibly during the weekend. 

When I used to trade Bitcoin a couple of years ago the amount of big moves that came during the weekend was staggering. It got to a stage where I had to leave a long position open on Friday 10:00 pm to reap the rewards on Sunday night when the market re-opened. The trading times have changed since then but a I noticed quite a few very big moves occurring during the weekend. I do not advise traders to leave positions open overnight or take on such large risk but that is what I had to do as otherwise I was missing all the big weekend moves. Of course it went wrong on a couple of occasions so it was a very high risk play and 'gapping' was a serious issue but I no longer trade Bitcoin in that way anymore. 

 

 

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