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Bitcoin - Price Behaviour

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Guest cryptocrypticse2

Yeah, i think it's gonna bump very high at the the end of 2019/

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May I ask why you think it is going to bump very high at the end of 2019? 

I do not know if you are right or wrong but would be interested in your views as to why you think this. 

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$4225.94 level is getting closer for Bitcoin. The fact that it has remained above $4000 is very encouraging and bullish. It is still early days but I am liking this slower and more solid upward trajectory rather than the rocket launcher style that led to an 80% crash from its all time high. 

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It is 5:37 am and Bitcoin is up nearly 8% and around 320 points and rising.

It is at $4470 and smashed what target I had in mind. It seems around the level I was referring to has attracted a lot of buying both before the price in anticipation and certainly after crossing the price. 

 

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Impressive price action this morning from Bitcoin. Hit $5102 and up over 13% right now though was even higher.

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A lot of people are messaging me asking if I think that Bitcoin has bottomed. The simple answer is that I do not know at this moment in time. Cryptocurrencies can look like they are on a bull run and entice traders in and then boom, it drops! Stop losses are very tricky as if they are too tight then the volatility will just stop traders out. A high risk tolerance is necessary to trade Bitcoin and other Cryptocurrencies.

One important factor today is that from the 'daily' it is crossed its 200 DMA. This is a positive sign. It does not mean that Bitcoin will just keep going up. There will be a lot of speculative capital and short term profit taking which will mean large drop along the way even if we are about to witness an upward and bullish trend.

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I fully expect a large dose of profit taking as traders will be extremely weary of losing any substantial gains made on Bitcoin. 

Bitcoin_20190402_17_06.thumb.png.3284713389c7c5d3a1e9935e836e7737.png

I am now going to show the same 'daily' chart as above but this time including 500, 600, 700 and 800 DMA's. As you will see this will provide a pathway for Bitcoin to attempt to travel to its destination. It is about to get very interesting for Bitcoin. The possibility of another downward move is still ever present as this is Bitcoin after all. However if if begins to surpass and stay above its 500, 600, 700 and 800 DMA's then it could present a more bullish case for Bitcoin going forwards.

Bitcoin_20190402_17_09.thumb.png.d81f6c0ebebcf455517fffea4bfb5a7d.png

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Whats the benefits of 500, 600, 700 etc? These are just random numbers surely? 

Things like the 200 MA etc relate to some extent to the number of trading days in a year, whilst same can be said for 20 MA (a month), 50 MA, a couple months etc. 

How do you use it?

 

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@cryptotrader,

Yes in a sense they are random numbers as you can choose which ever time period you like depending on your investment or trading style and strategy. If one wanted to look at stronger trends over a longer time period then one could look at longer time period moving averages. 

The most common ones are the 20, 50, 100 and 200 DMA's which I tend to use for trading. Bitcoin is an interesting one as it is one of the rare occasions where I have invested in it and trade it. I have discussed this before on this thread so will not repeat my rationale.

When it comes to Cryptocurrencies which in my opinion are one of the highest risk assets to invest and trade in then there are times when more robust indicators and criteria may be required. Hence why I begin to use 500 DMA's plus. Remember Bitcoin is over 10 years old. So we can look at price behaviour and longer term trend and the fact is that over this 10 year period Bitcoin is in a long term upward trend. I recall when Bitcoin was less than $30 and when it was less than $100. 

So how do I use it? Let me explain though different investors / traders can use if differently. Using more longer term moving averages helps especially when already in a position to confirm the long term bullishness and strength of the trend. 

  • So a bullish more longer term trend indicator could be when the 200 DMA crosses the 500 DMA to the upside. 
  • Or when the 200 DMA crosses the 900 DMA to the upside.

This would show a longer term trend merging with a short time period trend which in my opinion would be a positive indicator.  The key thing to remember is that on the chart I posted for Bitcoin, the 500, 600, 700 and 800 DMA's are in sight. Bitcoin hit $5102 today so it is not a million miles away from those longer term moving averages. If it were to hit them then that in my opinion would be extremely bullish and positive for Bitcoin. Longer term investors even look at the 1000 DMA when reviewing their investments. 

Now when you start overlaying the short term moving averages with the longer term moving averages you can sometimes spot price points which may prove difficult to cross (so resistance at certain price points). When I am investing / trading strong trends then I do not have time limits. I am in positions for as long as the trend lasts in that direction. Along the way I want to see if the price is still strong and on course during its journey and I find looking at longer time period moving averages useful. I accept this will be of little use to day traders, short term traders and even medium term traders. This is for those long term trends and longer time period positions whether they be investments or trades. Also it helps when trying to decide whether to add to positions on longer term trends. 

There is one important point I must make. Using moving averages by themselves does not guarantee anything. There is mean reversion after all to consider. It must be used along with other indicators to help make an informed trading decision at that time. It can merely help to increase the odds but does not guarantee any success in the trade.

Using longer term moving averages does not change the price action or enable you to predict the price action. One could argue that it offers little benefit and to be fair they could have a point. I use it for Bitcoin as it is in a longer term upward trend but is also extremely volatile and very high risk. 

@cryptotrader, do you not think if Bitcoin surpassed its 500, 600, 700 and 800 DMA's then it would present a more bullish case for Bitcoin going forwards? Would it not demonstrate a stronger long term trend? 

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What we may begin to see is what I regularly describe as an 'amplified' move upwards due to stop losses being triggered on shorts. If you go back to when Bitcoin futures were introduced, shorting Bitcoin, became possible. Now any unwinding of these short positions is going to see a sharp move upwards. Of course this will include large bumps 'drops' along the way.

I personally would like to see a more slower and steady rise in Bitcoin and Cryptocurrencies but this is a highly volatile and highly risky asset class. Speculation is rife. 

Does anyone know what the short interest is on Bitcoin futures?

I am not sure how accurate the following below are:

https://bitgur.com/chart/interest

https://datamish.com/d/000000004/btcusd?refresh=20s&orgId=1

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From what I am reading this morning via online media it seems the so called Crypto experts have come out and started giving price targets of $5200, $6000, etc. There is a strong possibility of another Crypto frenzy and FOMO taking place. This could drive up prices presenting a large disconnect to the fundamentals.

In the back of my mind, I have the 'large sell off' thought appearing. This is likely to happen but the key for me will be whether Bitcoin can stay above the $4200 level or not. This to me will determine whether this is a false breakout originating from thin air and speculative capital or whether it can consolidate strongly at around the $4200 level before any continuation of the trend upwards.

Right now it is all about taking advantage of this price action and using leverage to maximise any returns. It will be just as important to exit with a profit than to be left with a loss or be a latecomer to the party when others are leaving. 

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It really is anyone's guess where Bitcoin will begin to correct and see a large sell off. It will come, that I have very little doubt about. The question is when should one exit as any smallish drop will trigger tight stop losses and it could then continue going upwards. So a more wider stop loss is required at the expense of losing some of the monumental gains but that is an individual decision. It is a nice but a tricky decision to have though. 

I mean the one thing for sure is that a lot of capital is being allocated to Cryptocurrencies which has been patiently waiting on the sidelines and boy has it arrived in style. It could just be 20 - 100 millionaires flexing their muscles to make such a move possible. Add short positions being triggered and this move taking lots of stops out then it really does amplify the move excessively. 

 

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The sell off I was expecting came overnight. The question here will be how deep the sell off will be?

If the Cryptocurrency market is being controlled by a few 'whales' then they may entice further long positions by dropping the price so that it seems like they are getting better value than yesterday before any next upward move materialises. Then there could be a 'rinse and repeat' operation until exhaustion.

If this rally in Bitcoin and Cryptocurrencies is serious then there must be another move serious move upwards. I would prefer slow and steady but that does not seem likely based on the past few days price action. If this does not materialise then ensure you have an 'exit plan'. 

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I think it is feasible that 2019 becomes an accumulation phase for Bitcoin and other Cryptocurrencies. The so called 'Whales' may have started their acquisition programme and this may continue for the rest of this year. If that were to be the case and I do not know that it is then this could be just the beginning of the rally.

Now it could be that this is merely a 'hot fluffy' rally that is false. I don't know. The one thing I do know is that Bitcoin has not hit zero like many predicted.  It has not even come close to hitting zero. If it were junk and absolute garbage then why has it not failed already and been annihilated? I think there are some really clever and wealthy people who want it to succeed around the world at any cost and will do their utmost to make it work. Where there is a will, there is a way. The will is strong and there is clearly a lot of capital backing it. It is not always the best technology that succeeds. There are times when the technology or concept with the most support and financial backing enters the world market ahead of something that was clearly better but less understood. 

I think the world will make Bitcoin work in some form or another. Yes, there will be modifications and improvement along the way but the concept and technology will be adapted to suit the future generations and a global standard leader in the Crypto market will emerge. It may be Bitcoin or it may be something else. At the moment though based on price and market cap it seems Bitcoin is the leader of the Cryptocurrency asset class. 

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I remember trading Bitcoin around two years ago and I recall some of the biggest moves for me personally coming over the weekend where I did not close my position on Friday and come Sunday night the increase in profits were staggering. 

It may have something to do with the obsession in Asia, I don't know. Right now Bitcoin is above $5k on Saturday afternoon and is trading in the blue so there seems to be support over the weekend. It may also have to do with the Cryptocurrency market being a 24/7 market around the globe.

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There are two main points which the so called Crypto experts are discussing about Bitcoin's recent rally which they are inferring is only the start.

The first is in relation to how important both the 200 day moving average is and the 200 week moving average with regards to Bitcoin's price behaviour.

The second is about Bitcoin's block reward which is halving in 2020. Historically Bitcoin's price has surged around a year before the scheduled block halving hence why Crypto experts believe this recent rally is only the beginning. If that is true then one could potentially expect Cryptocurrencies to rise a lot prior to Christmas 2019. 

Now what one may see is a lot of accumulation of Bitcoin before such a halving event. Therefore one must look at the Bitcoin volume data very closely. If this does happen then I personally think it will attract a lot of speculative capital who think the price of Bitcoin is going to rise as the amount of Bitcoin in supply will becomes restricted over time. 

Now if the above happens then the question is can Bitcoin get to its previous all time high? It seems for now that the downside is priced in. The major downward pressure has occurred in 2018. 2019 seems like the period of major accumulation which should lead to another large bubble, seriously overbought territory and a parabolic rise of major proportions.

It does not matter whether trading Cryptocurrenies like Bitcoin is right or wrong, good or bad, sensible or ridiculous. The point is that those traders who are serious about making profits must realise that an opportunity has presented itself in Cryptocurrencies.

TrendFollower Acronym: RTT - Ride The Trend

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So far Bitcoin seems to be holding up rather well above $5000 level. It could still go down below this but for now it is behaving nicely. 

Those of you who are familiar with me will appreciate that I tend to mainly use the 'daily' chart. I will zoom in and out as necessary and when looking to enter a trade I will go down to the hourly or even shorter. 

Now it is reported that Bitcoin's 'Super Guppy' indicator has turned green for the first time since around January 2018. This to me indicates a bullish move with an upward bias on the 'daily'.

For those of you who are not aware of the 'Super Guppy', it is a combination of exponential moving averages. This is designed to signal when the price action basically switches from a bearish outlook to a more bullish outlook. The reverse can be applied too. Now the 'Super Guppy' has flipped green on the 'daily' for the first time since January 2018. 

I have attached this below which I have obtained from CoinDesk. 

image.png.8c57ddeaade4b544a81311f7cf457abe.png

The 'Super Guppy' was in the red for more than a year so a flip to the green is a very welcome move to the bulls and this should see further capital being injected into Bitcoin driving the price further higher in my personal opinion. 

For me I would like to see Bitcoin above the $6500 level to ensure this does not have another large move downwards and potentially look to make another new low. This downside risk is still present for me. Any bad news or horror stories in the online media around the world can be enough to cause mayhem and havoc and see Bitcoin decline 50% from here. This is simply the nature of the beast. 

The other risk is that Bitcoin is at overbought levels and this also presents a risk. For now one must enjoy the current price behaviour of Bitcoin and accumulate on any drops as it ventures upwards - Pyramiding Upwards. 

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Posted (edited)

Hi Trendfollower

In your analysis do you take any notice of the RSI

Thanks

Edited by Haven

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@Haven,

Yes, I do take notice of the RSI as that is why I state in my last paragraph that Bitcoin is at overbought levels. The RSI looks at the speed and change of the price action. It helps to measure the sentiment on a scale of 0 to 100. So for example, when the RSI is above 70 then it is deemed to be overbought and when it is below 30 then it is deemed to oversold. Now the current Bitcoin price action shows that the daily RSI is around 87 which to me suggests Bitcoin is extremely overbought. As I state in my last paragraph of the previous post that this presents a risk going forwards.

Bitcoin may have bottomed (though I do not know that it has) so when starting on a bull run and uptrend one expects it to be in overbought territory as that is what one expects when breaking out and trending strongly on an upward trajectory. This RSI signal does not surprise me and was expected. What happens next will be important. Will it continue trending upwards and increasing the RSI to higher overbought levels or will there be a big sell off?

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Cryptocurrencies can move at any point with no specific or logical reason. It can catch a lot of traders on the wrong foot which is why a lot of them miss the big returns or the best 10 days as Tom Lee puts it. 

Technical indicators are telling you what has happened in the past. It does not tell you what is going to happen in the future. Cryptocurrencies are a volatile, unpredictable and high risk asset class. It can also provide double digit returns in a day and if one adds leverage to the mix then there are significant gains to be had. On the flip side if one is not careful then there are extremely large losses to be incurred too. This is where risk management is key.

For example, some of the indicators that appear on Bitcoin the whole world knows about. So it is not a secret. If following indicators was all it took to be a profitable trader, trading and making lots of profits would be easy but it is not. One of the reasons is because those large players (individuals and organisations) that can move the Bitcoin price know all about these indicators and how traders are going make trading decisions based on such indicators.

I posted yesterday that the RSI is high for Bitcoin which suggests overbought territory. Now if everyone followed such indicators who can influence and move the Bitcoin price then one would expect lots of selling and the price declining. This morning (7:00 am UK time) all the Cryptocurrencies on IG's platform are blue. I reported yesterday that the RSI for Bitcoin was 87 but what is stopping it becoming 88, 89 or 90? There are no hard and fast rules when trading Bitcoin or any of the other Cryptocurrencies. This is what makes it so hard and dangerous trading it and why in my opinion it is one of the riskiest asset classes to trade. 

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The point I made on the previous (above) post is nicely highlighted by today's Bitcoin price action. An indicator is just that, an indicator. It merely indicates something. It merely points out or suggests something. It is not a given. 

Bitcoin has demonstrated 'Higher Lows' and 'Higher Highs'. It reminds me of Gold's price action after August 2018 and there are a few similarities. Bitcoin is looking strong and bullish today. Volume is clearly supporting the price behaviour and it seems there may well be further upside regardless of the RSI and the indication of Bitcoin being overbought. Being overbought is actually a positive. When an asset makes new highs or new 52 weeks highs and then continues making new highs after this, it usually smashes overbought levels time and time again. 

The current Bitcoin price behaviour highlights nicely how it can surprise and wrong foot traders who try to be clever using technical analysis. Getting in as early as possible on Cryptocurrencies once a trend is identified and then either merely holding or adding to the position as the price increases (on the dips) is a potential way to trade. The exit should only occur when there is a clear trend reversal, otherwise holding the position is the most wisest thing to do. Otherwise, the risk is not being in a trade when some of the most positive and bullish price action occurs meaning missing some of the biggest gains due to being out of the trade. 

Bitcoin_20190410_20_56.thumb.png.a984a276c4fabe8a498569dcb3c02130.png

A lot of the people talk about the daily interest charges. Yes they are what they are but in a strong and bullish trend the price performance and level of profits based on leverage should really make the charges effectively small and meaningless. That is if you are on the right side of the trend and trade!

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A lot of tighter stop losses will be triggered on this current drop in Cryptocurrencies available on IG's UK platform. They are all well in the red this morning at 5:30 am. Also Fibonacci retracements may come into play. 

 

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If Bitcoin was to experience any Fibonacci Retracement of around 38.2% then it could go as low as around $4829.73. If it were to experience a 50% retracement then of course even lower.

I want to follow the price action to see if Bitcoin is going to behave under such 'technical rules' or simply play by its own rules and create new 'technical rules' along the way.  

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Guest Haven

Hi Trendfollower

Thank for your valuable insight. I think the latter is more likely. I tend to trade Ether as it doesn't scare me as much as Bitcoin and follows same price action. It's definitely a better trade for any novices trying to learn

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Guest Haven,

No problem. 

Bitcoin is trying very hard to hold on to the $5000 level which it is doing well in defending. 

This correction was expected as the Cryptos had gone up too much too fast and was unsustainable even for a Cryptocurrency. 

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There is some absolutely crazy volatility going on not just for Bitcoin but all the Cryptocurrencies that IG offers on its platform.

My guess is it is computer driven automatic trades going on using complex algorithmic trading methods and high speed frequency trading. 

What this enables them is to ruthlessly close down all those poor innocent traders with tight stop losses on a high risk asset like Cryptos that get stopped out thus making losses whilst the big boy bullies buy back in at cheaper / lower prices. Rinse and repeat when one least expects. This is whilst the charts are showing a bullish trend and they know exactly what indicators traders who trade Cryptos are using.

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Bitcoin seems to be going through a consolidation phase which could go either way in my opinion. Bulls wants to see $6500 and above and the bears want to see new lows being made. 

Bitcoin may spend quite a bit of time within this range until it decides what it wants to do. 

 

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Bitcoin hit $5320 overnight. 

As time moves forward the 52 week high for Bitcoin will decline. To illustrate the point based on today's current prices Bitcoin's 52 week high would be close to $10k. Now it simply is not going to hit that either this month or next month. However, if its 52 week high was say $6k then it is more likely to hit than on speculative capital, herd behaviour, trend followers, etc. 

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