With Bitcoin prices reaching $4,000 and setting a new floor, the question on investors’ mind is whether or not the price will keep its massive rally. There are two main opinions on the future of Bitcoin’s price, some argue it will keep rising to $5,000 or even $6,000 levels, while others believe that these price gains are unsustainable and a crash is imminent. What is interesting is nobody seems to think that prices will remain at the current levels, meaning this could be a good opportunity to take advantage of the volatility.
Key Points:
- Bitcoin price mania continues, traders scared of potential blow-off
- Scarcity of Bitcoin pushing the price up
- RSI @ 78 and still rising in overbought market
During continuous price rallies like these, greed and FOMO are one’s biggest enemies. If one gets too greedy by anticipating higher and higher prices, one will loose most of their profit when the inevitable crash comes. On the other hand, if one buys in during such a rally because of the fear of missing out (FOMO) one will most likely lose money during the slightest pullback.
A low risk strategy is to always buy on the dip and sell on the peak. While it is extremely difficult to predict peaks and dips precisely, by buying on the downtrend and selling on the uptrend one can maximize their chances of entering a good position. As a disclaimer the above is not trading advice, just general tips that can be found anywhere.
Speaking of peaks and dips, the current price rally resembles the new paradigm phase of a classic stock market bubble. Here is a comparison between a classic chart of a major bubble vs the current bitcoin price:
As you can see, the recent price rise since July of last year where Bitcoin was worth only $198 is extremely steep. While the same thing was said when Bitcoin peaked at $1200 back in December of 2013, traders weren’t completely wrong as the price dropped over 90% before starting its bullish run again. Thus, it is important to place stop-loss orders in case of an abrupt crash, as quick highs lead to quick lows.
On the other side of the order book, there are still plenty of bullish investors that believe Bitcoin’s price will continue its price hike. With the ongoing upgrades to the Bitcoin Protocol (hardfork, SegWit) and the increased scarcity of the market (BTC-E shut down, Bitfinex removing support for U.S traders, halvening effect) it is imminent that the market will keep its uptrend.
Theoretical speculation aside, its time to take a look at some technical indicators. RSI is still in the overbought territory at 78, it has been inching towards the overbought level since last week and two days ago finally reached 70. Meaning, the past two days the market has been in a dangerous territory.
Another fitting indicator is Elliot Waves. tradedevil provides the following chart from tradingview:
Elliot Waves move in 5 waves up 3 waves down. The above chart shows that if using the Elliot Waves analysis, Bitcoin’s price is expected to pull back to $3500 followed by another wave up to $4500 and beyond. After those waves however, the next three waves will be corrective dips in the market.
TradeDevil shares his tips in the recent market:
“Now is the time to be patient and sit for the entry that offers the right risk reward. If you’re long, this is a good time to tighten stops. If you’re a raging bull with a “HODL or die” mentality and willing to give back up to $500 of your profit, your opportunity to add is at $3,500. Just a reminder, FOMO is your enemy. Wait for your pitch.”
Disclaimer: This is not trading advice, this article is for educational purposes only.