Why do market cycles determine BTC price analysis?
Since last 3 years, we have seen Bitcoin and crypto-assets market experiencing drastic changes; during 2017 reaching a wide growth turning in 2018 to a deep correction and having a new upward momentum during this 2019, so this year Bitcoin has reached its highest price, above USD 13,500, to decrease weeks later. These fluctuations are called market cycles.
But what do analysis say about market cycles and their relation with bitcoin price?
From a technical point of view, cryptocurrencies have characteristics that make them a very special asset; for determining its value, Technical Analysis is a useful tool that measures each characteristic.
Technical analysis oriented to cryptocurrencies assesses and evaluates price series, trade volume, candlestick patterns, market structure momentum and the historical price movement from its origins, with special emphasis on their volatility, a very characteristic feature of this market.
On Technical analysis as a measure of things is essential to study the Intermarket, that is, the relationship that bitcoin has with the US dollar or against some emerging market, to measure the appetite for risk of market participants. Correlations with other cryptocurrencies such as ETH, XRP or LTC are also considered.
Talking about bitcoin price during last months related to market cycles, as well as the upward momentum, correction, and accumulation that the cryptocurrency has experienced, bitcoin price series is going through an upward trend at the structural level.
To analyze the present market is important to consider the latest upward momentum experienced by bitcoin and the rest of the crypto actives in 2017, when cryptocurrencies experienced a spectacular rally, which wasn’t the most important but most mediatic, being the one that brought the price of bitcoin to almost USD 20,000.
It’s easier to understand 2018 as a year of correction, with sharp drops in the price, bringing bitcoin value below USD 5,000. We saw a deep correction process, extended in time, where altcoins lost around 90% of their value, while Bitcoin lost about 80%. During this correction, sustained over time, dynamism and momentum in the market were lost.
All this is part of the technical structure that the crypto-asset markets have already been doing. Then began a process of institutional accumulation, quite visible, in terms of volume, in terms of price behavior, when bitcoin made a floor between USD 3,000 and 3,500 -at the beginning of 2019.
Market cycles: bitcoin and its price structure
These facts have led to deduce that we are currently facing a price advance, as evidenced during the last weeks of June when bitcoin was located at above USD 13,500. This advance, besides, seems to be part of a new bull market cycle, which is beginning and which, will last long.
We are now at a correction point but there is a high probability that the extension of the new upward movement will remain in time. We have seen in 2019 the start of a new impulsive cycle.
The increase in prices experienced during June will have to go through a major correction, which could mean a retraction of up to 60% of current bitcoin prices, to further deepen this upward cycle of the market. It should be noted that an impulsive Elliot cycle, based on 5 waves: 3 impulsive waves, 2 corrective waves and then corrective ABC waves, which are visible through the price charts.
At the end of 2018 and the beginning of 2019, there was an important area of accumulation, with an increase in the volume of trade. However, during the current growth, when bitcoin is located in the order of USD 10,000 or USD 11,000, there is a loss in the exchange volume which means that it isn’t sustainable without a loss.
This gives us to understand that the buying share of the institutional is low, and can mark the beginning of a distribution stage, to take us to a new correction. We do not know where it ends, but we have likely seen the price ceilings this year.
Bitcoin price could significantly correct if it falls below USD 9,500, to explain:
The unit value in USD 9,500 is a key area since it is a base price, where there was great institutional participation. If that correction were maintained and the price falls in that area, “the price would reach USD 6,000–6,500. If they are in the market, having a stop loss at that level is extremely convenient.
Technical analysts are not so much in the business of predicting, but more in the business of measuring. It is difficult to predict exactly, practically impossible, to know where the roof or floor of a market is. However, it is possible to measure the evolution of price behavior for one to be prepared in the face of what is happening.
Alberto Cárdenas, investor and analyst.
In 2019 the bullish momentum has been evident but, until now, there has not been a major correction, argued Cárdenas. For him, it is possible that the highest prices of the year have been given by overbought bitcoin, without sufficient volume of exchange and entry of money to sustain the rise. “Likely, we will now see a correction,” he said.
However, the upward trend, structurally speaking, will remain. “It does not mean that the long-term bullish structure has changed, it’s a normal part of the cycle. According to Elliot’s theory, it is very likely that, after this wild rise, we see a wave 2, which is a corrective wave, which is usually 60% of the previous movement, which would take us to levels close to 6,000 dollars “, described Cárdenas.
There is a correlation between the USD and the BTC
The specialist noted that there is a direct correlation between the US dollar (USD) and bitcoin. In this case, the correlation is negative, so that when the dollar increases its value against raw materials, such as oil or other markets, BTC and the rest of the cryptocurrencies fall, and currencies appreciate when the dollar falls.
Cryptoactives come to be a competition for the dollar. There is a negative correlation between the crypto actives and the dollar. When the dollar strengthens, we see declines in the crypto active market, and when it falls, we see important increases. I can say that all this impulsive rally coincides with a significant fall that the dollar is having in international markets.
Alberto Cárdenas, investor and analyst.
As he explained, this is verified by analyzing the relationship between the conflict of the traditional international market, especially between China and the United States, and the growth of market capitalization and the prices of cryptocurrencies.
The price increase is good news in itself, which has helped the negative correlation between the US dollar and bitcoin is manifested in a significant price increase. “When you see that the prices take off from a base where they were asleep and start rising again, the news starts to accompany and returns the interest and optimism for the development. All this makes us think that we are starting a new bullish cycle. I am optimistic about the future of crypto actives, “he stressed.
Cárdenas compared the importance of bitcoin with that of Amazon in the traditional stock market. Despite being born amid the ephemeral effervescence of the dot com, Amazon managed to maintain itself over time, because it added value and its performance is a benchmark for high-level corporate success. Bitcoin will be that reference among cryptocurrencies.
In this case, Cárdenas pointed out that bitcoin will be the reference in the ecosystem of cryptocurrencies, with a role similar to that of gold.
Published at Wed, 17 Jul 2019 23:59:50 +0000
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By wuestenigel on 2017-11-29 17:57:01
