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Bullish reversal? Traders debate whether $37K BTC price is a trend reversal

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The cryptocurrency market flashed bullish on June 9 as Bitcoin (BTC) price reversed course and rallied 20% to $37,500. 

For the past few weeks, analysts had been debating whether or not BTC was entering a long-term bear trend and the argument has been further complicated by a mixture of positive and negative headlines including the adoption of Bitcoin (BTC) as legal tender in El Salvador and authorities in China ordering Chinese search engines to block results for searches related to the top crypto exchanges in the country. 

Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin has surged 20% from a low at $31,000 late on June 8 to an intraday high at $37,450 as bulls look to take control of the trend.

BTC/USDT 4-hour chart. Source: TradingView

The move higher is seen as a bullish development for many including Mike McGlone, senior commodity strategist at Bloomberg Intelligence, who now feels that BTC is more likely to reach $40,000 than collapse down to $20,000. On the other hand, traders like Rekt Capital believe that BTC needs to have a weekly close above $32,000 to avoid further downside. 

The coming days will determine the fate of the bull run

The steady flow of positive announcements combined with the renewed regulatory crackdown in China has led some traders to ponder whether a bullish reversal is at hand or if the current price action is nothing more than a bull trap. 

According to Delphi Digital, the clear head and shoulders pattern seen on the BTC chart is a potential bearish indicator. 

Bitcoin head and shoulders pattern. Source: Delphi Digital

Despite this bearish pattern, the analysts also noted that a bullish RSI divergence has also formed, indicating the possibility of a trend reversal in the near future.

Bitcoin price and a bullish divergence on the RSI.  Source: Delphi Digital

According to Élie Le Rest, partner at digital asset management firm ExoAlpha, “the thesis for Bitcoin as a store of value is stronger than ever” but he feels that the top cryptocurrency “needs to increase its dominance” in order for the current bull run to continue.

Le Rest pointed to the news that El Salvador would recognize BTC as legal tender as “a huge step forward toward Bitcoin adoption” and he expects other countries to follow suit in the coming months and years.

Regarding Bitcoin’s future prospects, Le Rest mentioned that following the lower level retest of the $30,000 to $40,000 range over the past few days, a break above $40,000 “could resume the bull run that took place a month ago.”

Le Rest said:

“Traders still have some doubts on where the market is heading, so leverage has remained relatively low as forced liquidations have been painful since May. Breaking $40,000 could give the boost in traders confidence to leverage again their book to power new highs of the crypto market.”

Traders have also been keeping a close eye on Ether (ETH) and Le Rest pointed to the “massive ETH outflow” seen on June 8 as “a positive sign that the ETH bull run is not over yet,” but he cautioned that alternative chains like the Binance Smart Chain, Solana, and Avalanche “are putting a lot of efforts to take their DeFi market share.”

Altcoins rally alongside Bitcoin

Daily cryptocurrency market performance. Source: Coin360

Bitcoin’s rally to $37,500 also provided a boost to many altcoins. 

Ether saw its price rally 14% from a low at $2,300 on June 8 to an intraday high near $2,630, and Delphi Digital pointed out that the price of Ether is being supported by a decline in the circulating supply of Ether as 23% of its supply is now locked up smart contracts.

Ether supply locked in smart contracts vs. price. Source: Delphi Digital

Other notable performances include a 23% gain in the price of Kusama (KSM) to an intraday high at $486 following the launch of the Kusama parachain auctions and an 18% gain in the price of the Curve DAO Token (CRV) to $2.50.

The overall cryptocurrency market cap now stands at $1.63 trillion and Bitcoin’s dominance rate is 43%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bullish reversal? Traders debate whether $37K BTC price is a trend reversal

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Unsure about buying the dip? This key trading indicator makes it easier

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When an asset enters a bear phase and the headlines are negative, analysts project further downside, and the sentiment shifts from optimism to pure gloom and doom. This results in panic gripped traders dumping their positions near the bottom of the downtrend instead of buying. 

How can traders go against the herd and build the courage to buy in a bear market? It is not easy because if they purchase too early, the position may quickly turn into a loss. However, if they wait for too long, they may miss the early part of the rally.

Although pulling the trigger during a bear phase is difficult, the relative strength index (RSI) indicator can identify market bottoms and favorable risk to reward scenarios.

Let’s review a few examples of when to buy in a bear market.

Look for extremely oversold levels on the RSI

BTC/USDT daily chart. Source: TradingView

Bitcoin (BTC) topped out close to $20,000 in December 2017 and started a long gut-wrenching bear market that bottomed out near $3,300 in December 2018. During this period, the RSI entered the oversold territory (a reading below 30) on five occasions (marked as ellipses on the chart).

In the first four instances, the RSI dipped close to or just below the 30 level but during the fifth time, the RSI dropped to 10.50. This is a sign of capitulation where traders who had been buying pre-empting a bottom or had held their positions in the bear market succumbed to fear and purged their holdings.

Usually, long bear markets end after prolonged periods of fear-based selling. Smart traders wait for these opportunities and buy when the markets are deeply oversold, like when the RSI below 20.

BTC/USDT daily chart. Source: TradingView

Fast forward to 2019 and 2020 when the RSI dipped close to 20 on two occasions and dropped to 15.04 on March 12, 2020.

The first instance when the pair dropped to 19.60 on Sep. 26, 2019, turned out to be a losing trade because the price made a new local low weeks later on Oct. 23, 2019. This shows that traders should be ready to close their positions when the stops hit because if they don’t do that, the losses may keep growing.

On Nov. 24, 2019, the RSI dropped to 22.32, just above the 20 level. For traders who keep a very tight stop, this would have also turned out to be a losing trade with the drop on Dec. 18, 2019. However, these were all small losses, which would not make a dent to the portfolio unless traders were using heavy leverage.

The RSI plunged to 15.04 on March 12, 2020, and traders who were brave enough to buy after this drop would have made outsized gains had they held onto their positions during the bull phase, which topped out at $64,854 on April 14, 2021. This shows how after two losing purchases, traders eventually hit the jackpot using the RSI signal.

Combining the RSI with moving averages produces a better signal

During Ether’s (ETH) bear phase in 2018, there were four instances when the RSI dipped below or came close to the 20 level. The first opportunity offered a strong return to traders but the other two instances turned out to be losers.

To avoid whipsaws, traders may add extra filters to keep them out of losing trades. One simple example could be that instead of buying just after the RSI drops below 20, traders may wait for the price to close above the 20-day exponential moving average for three successive days before purchasing.

ETH/USDT daily chart. Source: TradingView

As seen in the chart above, the signal to buy in April 2018 triggered as the ETH/USDT pair rose above the 20-day EMA after dropping below the 20 level on the RSI. This trade turned out to be profitable as the pair witnessed a sharp up-move.

The next buy signal in August did not meet the criteria because the price did not rise above the 20-day EMA for three consecutive days. The third trade in September would have turned into a minor loss but the one in November would have made a huge profit.

Bullish divergences and how to spot them

Another important tool that can help warn traders of a possible trend reversal is a bullish divergence. This happens when the price continues to fall but the RSI makes higher lows, indicating the bearish momentum could be weakening.

LTC/USDT daily chart. Source: TradingView

Litecoin (LTC) shows the formation of two bullish divergences during the 2018 bear phase. The first divergence that formed from August to September of 2018 turned out to be a false signal because the price did not rise above the swing high.

However, the second bullish divergence from November to December of 2018 turned out to be a profitable signal right at the bottom, which was followed by a sharp rise within the next few days.

ETC/USDT daily chart. Source: TradingView

Another example of a slightly longer bullish divergence can be seen in Ethereum Classic (ETC) from September to December 2019. During the period, the price made lower lows but the RSI formed higher lows. The ETC/USDT pair surged in the next few days after it broke above the swing high.

VET/USDT daily chart. Source: TradingView

VeChain (VET) also showed the formation of a bullish divergence from September 2020 to October 2020, which was followed by a huge bull run. This shows the bullish divergence is a useful tool, which if used wisely can benefit the traders immensely.

Some important takeaways

Bear markets offer the opportunity to buy an asset at a significant discount but it is not easy to purchase when everyone is selling and the sentiment is negative.

However, traders who use the RSI can develop an edge. An extremely oversold reading on the RSI is a sign of capitulation, which generally marks the end of a bear phase. This strategy can help traders pull the trigger when it matters.

Sometimes, the RSI may give false signals, hence, traders can use additional filters like daily closes above the 20- and 50-day moving average to avoid whipsaw trades. Spotting bullish divergences can also alert traders that a downtrend may be ending.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Unsure about buying the dip? This key trading indicator makes it easier

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Amid rising stablecoin inflow, cautious traders fear a dead cat bounce

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The recent extreme volatility in the cryptocurrency market following Bitcoin’s (BTC) dip to $30,000 and the recovery to $38,000 has traders confused about whether the current price action is a ‘dead cat bounce’ which will see token prices head lower or a solid reversal that will set the floor for the next leg higher for the market. 

While BTC price still remains more than 40% below its all-time high of $64,863, bulls have managed to weather multiple attempts to significantly break below support at $36,000. 

BTC/USDT 4-hour chart. Source: TradingView

A closer analysis of on-chain data and exchange inflows shows that Bitcoin’s sell-off led to the market-wide downturn and Delphi Digital analyst Nick Pappageorge highlighted the fact that BTC inflow to exchanges “topped over 20,000 BTC in just one hour on Wednesday,” which was the highest level sesince March 2020.

BTC exchange inflows. Source: Delphi Digital

FUD-o-rama destabilizes the market

One of the major sources of market turbulence identified by Pappageorge was the seemingly daily FUD headlines, including yet another Chinese government ban of cryptocurrencies and concerns that Tesla would dump its Bitcoin holdings. These back-to-back fear-laced narratives led retail traders to offload their coins on exchanges to escape a further price slide.

Pappageorge also pointed to concerns raised by a pair of hacks on the Binance Smart Chain which saw the price of PancakeSwap (CAKE) and Pancake Bunny (BUNNY) plunge, with the latter being drained of $45 million worth of user funds as compounding market fears.

The turnaround in sentiment this week has been in part fueled by positive headlines such as the formation of a Bitcoin mining council following a meeting between Elon Musk, Michael Saylor and North American Bitcoin miners, which has helped spark a turnaround in BTC and altcoins. The quick reversal so triggered the debate on whether the current market activity resembles a dead-cat-bounce or a trend reversal. 

Experienced traders accumulate at lower prices

While many of the newer entrants to the cryptocurrency market have found the recent volatility nauseating, the more experienced investors jumped at the chance to accumulate BTC at a 50% discount as the number of new accumulation addresses reached new all-time highs amid the shakeout.

Number of Bitcoin accumulation addresses. Source: Glassnode

Well-known Twitter personality and Bitcoin analyst PlanB posted the following chart showing how Bitcoin oscillates around the stock-to-flow (S2F) model, showing the recent downturn is well within the standard range it deviates.

BTC price oscillations around S2F model. Source: PlanB

PlanB said:

“Buying opportunities like today are rare (Q1 2019 when I wrote the S2F article, March 2020 due to covid, and now). Life is all about choices.”

As for bullish signs needed to support a quick recovery, the May 24 Delphi Daily report from Ashwath Balakrishnan highlighted the “sharply rising” circulating supply of fiat-backed stablecoins, which has increased from “15 billion to nearly 21 billion in the last 5 days.”

Stablecoin circulating supply. Source: Delphi Digital

While this could be a sign that dip buyers are “loading up ammo,” Balakrishnan was sure to note that “it could also just be stablecoin arbitrageurs” and stressed the importance of “ensuring that the circulating supply doesn’t drop sharply to confirm these inflows will be deployed.”

A record amount of dry powder is now available on exchanges but at the same time, an entirely new cohort of cryptocurrency investors who just experienced their first 50% pullback are now wondering if they should pull out the market or double-down on their investment. The more experienced in the crowd are betting that the market is headed higher but further volatility is all but guaranteed.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Amid rising stablecoin inflow, cautious traders fear a dead cat bounce

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5 Ways to Learn About Cryptocurrency

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5 Ways to Learn About Cryptocurrency

There has been a very noticeable shift in the public conversation surrounding cryptocurrencies over the last year. We have seen a marked increase in the amount of institutional interest in the biggest coins, the explosion of Dogecoin, as well as sizable investments from publicly traded companies and other high-profile investors. What’s more, there is a wealth of knowledge online that is free and easily accessible that newcomers can use to better acquaint themselves with crypto. 

An increasing number of businesses are accepting cryptocurrencies as payment for goods and services and the technology used to mine and store coins have improved dramatically. Cryptocurrencies are being touted as the next major store of value in an unpredictable global economy. Naturally, retail investors who may have once ignored this asset class or been entirely unaware of it are starting to take an interest. If you are new to cryptocurrencies, below are 5 ways to learn about them. 

Take a Trading Course

For many people, learning is best done hands-on, and there is really no better way to get this kind of experience than by taking one of the many highly informative crypto trading courses out there. These courses have been springing up a lot in the last couple of years and they are usually a good place to start if you have the money and time to invest and would like to see how trading is done from start to finish, as well as a breakdown of the technology and major currencies themselves. 

You get hours of on-demand video accompanied by live examples of real investing that you can then take and apply to your own crypto strategies. There are beginner and advanced courses, so you can continue the learning for as long as you like and at as high a level as you feel comfortable. 

Read Industry Publications

Formal education is important, but staying up-to-date on industry and market news is crucial for investors, regardless of the asset class. If you want to know what the market is doing, what experts think about particular coins, exchanges and wallets, and where and why you should invest your money, then putting together a daily reading list of journals, magazines and periodicals is essential.

You can simply bookmark the publications you would like to read, but a better way to manage and curate your information diet is using a content aggregator like Feedly, which lets you pick and choose your reading material, segment it by category and then gives you a steady stream of all the new headlines published by these outlets as they become available. 

Use a Mock Trader

Demo trading sites and crypto simulators abound and they are all designed to give you real-time experience buying and selling digital assets without any of the risks. The best way to use these training tools is to spend some time researching the coins you are most interested in trading and then purchasing them using your mock account and trying to understand how and why the prices are fluctuating based on the information you have available to you. Learn why certain coins might go up and others down until you feel confident that you are able to read the market well enough to start putting real money into it on real exchanges. 

Browse Forums 

Every intermediate or advanced investor in any asset class, at one point, started as a beginner. They had to learn the ropes, understand the language, and experience investing first-hand before they eventually evolved into competent, confident investors.

One of the biggest advantages when you are a beginner, in any field, is to be surrounded by people more experienced than yourself, and ideally those who are willing to share their knowledge and experience with you. Even if they are not, however, there is still a lot to be gained just by observing knowledgeable and seasoned investors interact and weigh-in on different crypto-related topics and current events. 

Places like crypto subreddits on Reddit.com, or the comment sections of popular podcasts and news outlets are good places to browse, both when you are first starting out and as you begin to learn the ropes. Here are where people who actively invest come to give their two cents on major market goings-on, argue with one another about investments, opportunities and threats, and trade tips and tricks. Absorbing all of this as a new investor can be overwhelming, but watching experienced investors interact is one of the most helpful things you can do as a newcomer. 

Read the White Papers

If you have a math or programming background, and even if you don’t and are willing to teach yourself the basics, it is always worthwhile to start your research into a coin by reading its white paper. Any large investor in cryptocurrency, institutional or otherwise, has read a given coin’s white paper before deciding to invest, as the white paper is essentially the proof of concept for a cryptocurrency.

It lays out how the coin operates, what unmet market need it serves, or which need it serves better than the competition, as well as a list of other important factors including the supply of the coin and how it is mined and validated. There are tips and tricks to getting the most out of a white paper. 

It is important to understand the fundamentals of a coin, and any asset for that matter, otherwise you are investing without really knowing the product. Sure, you might enjoy a bull market or time a major run on a coin and make money, but if you truly understand why something is and will continue to be useful and therefore its adoption and proliferation potential, you can make much more confident and hopefully accurate investment decisions. 

Conclusion 

Learning a new asset class takes time and dedication. This is something you have to chip away at day after day. Cryptocurrencies are highly complex assets, and the underlying technology can be difficult for many people to wrap their heads around. Perseverance is key. If you are new to cryptocurrencies and blockchain and are determined to turn yourself into a knowledgeable, experienced investor, keep the above ways to learn and improve in mind and make every day a quest to learn more about digital currencies.

5 Ways to Learn About Cryptocurrency

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A $1 billion crypto fund could be on its way from Andreessen Horowitz

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Building on its previous crypto involvement, VC firm Andreessen Horowitz is now reportedly gathering thunder for another fund, according to an article from the Financial Times, or FT.

“The new fund, Andreessen’s third that is focused on cryptocurrency investments, is aiming to raise between $800m and $1bn from investors, according to four people with knowledge of the process,” FT wrote on Friday.

A Venture Capital, or VC, firm, Andreessen Horowitz also operates under the name a16z. The entity is active in the crypto and blockchain sector, and has invested in a number of projects. It plans to aim the new fund’s capital toward crypto industry projects and digital assets, FT reported.

The VC player was also a heavy investor in Coinbase, which recently went public on April 14. Andreessen Horowitz has offloaded about $120 million of its Coinbase stock, although it held roughly $11 billion in the asset at the time of its listing, according to regulatory filings cited by FT.  

In April 2020, headlines surfaced regarding the entity’s pursuit of $450 million for its second crypto-specific fund. The firm ended up securing $515 million. 

The crypto space overall has seen considerable capital inflows over the past year, evident in the industry’s $2 trillion asset market cap valuation, which it reached in April 2021.

A $1 billion crypto fund could be on its way from Andreessen Horowitz

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Trading apps usurp TikTok in popularity

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Two trading apps have risen to the top of Apple’s App Store in recent days. Robinhood holds the number one position, with Coinbase in second, at time of publication on Friday. In third: popular social media platform TikTok. YouTube, Instagram and Snapchat hold the fourth, fifth and sixth positions respectively.

One possible conclusion? Folks are now more interested in swapping crypto and financial assets than they are in interacting on various social media platforms — a conclusion noted by CNBC in an article on Friday.

Robinhood saw significant coverage in January when the company halted purchases for GameStop stock. The decision came after the asset’s price spiked in tandem with activity from a Reddit group known as Wallstreetbets.

Second-place app Coinbase has also hit many headlines this year, especially in recent weeks in anticipation of its direct stock listing. Chatter rose as the stock, under the ticker COIN, was listed by Nasdaq on Wednesday.

Crypto and stocks largely entered the retail spotlight after they both crashed in March 2020. Emerging from the event, both markets posted recoveries, with the crypto markets going on to reach new all-time highs. Bitcoin’s price has since more than tripled its record high from 2017.

Trading apps usurp TikTok in popularity

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