Predict the Next Bitcoin Price Plateau

By: www.ProfitableInvestingTips.com

https://profitableinvestingtips.com/profitable-investing-
tips/predict-the-next-bitcoin-price-plateau
In the last year or so since crypto winter engulfed the
world of Bitcoin, traders appear to have become more
thoughtful. The sharp ups and downs in Bitcoin price
seen in 2021 and even going back to late 2017 gave way
to more moderate price shifts followed by Bitcoin
price plateaus.

This happened as Bitcoin prices fell and is continuing as
prices rise. How can you predict the next Bitcoin price
plateau? The myth that Bitcoin and the rest of the
crypto world were somehow divorced from the realities
of the wider financial world has been shattered. What
cues do you look for today in order to profit from
swings in Bitcoin prices?

Fundamental Versus Technical Analysis of Bitcoin

The assumption that Bitcoin and other crypto tokens
would go up in price forever was a fallacy that resulted
in the collapse of many crypto exchanges, the
bankruptcy of folks like Voyager Digital, and even
charges of fraud as crypto businesses scrambled to
maintain solvency in the face of lower and lower
crypto price plateaus throughout 2022.

Those who successfully traded Bitcoin relied on two
things, fundamental analysis of what drives Bitcoin
prices and technical indicators that can predict market
price swings based on evolving price patterns. Both
approaches have their pros and cons when trading
Bitcoin.

What Fundamentals Drive Bitcoin Prices?

When Bitcoin was invented, its internal coding limited
the eventual, final number of Bitcoins that will ever be
able to exist. This makes Bitcoin distinct from fiat
currencies like the US dollar, yen, euro, or British
Pound. There will be no central bank or government
turning on the printing presses and cranking out
billions or trillions of Bitcoin to balance a budget or
buy votes.

This is Bitcoin’s strongest fundamental value. Other
“fundamentals” were assumed to be that Bitcoin would
be a hedge against inflation and a store of value when
the financial world fell apart (like last year). That did
not happen. What Bitcoin did was mimic the Nasdaq
stock market in its movements up and down in
response to Fed rate hikes, the war in Ukraine, and
speculation about the rate at which inflation would be
reduced.

Banking Crisis Was a Winner for Bitcoin

The banking crisis was good news for Bitcoin as it gave
the impression that Bitcoin and the crypto world were
safe from this part of the financial system even though
at least one medium sized bank went under because of
its mishandling of crypto investments. The markets
assumed at the end of 2022 that the Fed was done
raising interest rates. Stocks went up and do did
crypto. The glitch in the banking system was frosting
on the cake for Bitcoin and brought it to a new price
plateau.

How Reliable Is Technical Analysis for Trading
Bitcoin?

Prices in markets are eventually determined by the
fundamentals of supply and demand. How valuable is
something? How much are folks willing to pay for it?
However, getting from point A to point B in time
involves speculation, guessing. Is the price of Bitcoin
(for the Nasdaq, S&P 500, gold bullion, Microsoft
stock) going up or down and by how much?

As traders buy as sell based on their predictions of where
prices will go the sum total of their actions leave useful
cues. How many options traders are betting on the
market going up versus going down (calls versus puts).
This is the VIX or “fear” index. How volatile
(uncertain) is the market? What is the trading volume
(level of interest) for a stock or crypto token like
Bitcoin.

When trading volume goes up it tells us that people are
either buying a stock or crypto token because they
think it will go up in price or selling because they think
it will go down. When the price of Bitcoin is going up
and trading volume is high traders think that this is a
market rally and they jump in and buy. Unfortunately,
in the case of Bitcoin, they are all-too-often being
fooled by Bitcoin wash trading.

In this case, big traders are buying and selling
simultaneously to create the illusion that there is far
more interest in the Bitcoin market than there really is
at a given point in time. A better technical indicator
for Bitcoin is probably the moving average which
smooths out daily fluctuations and more clearly shows
when Bitcoin is moving from one plateau to the next.

For more insights and useful information about
investments and investing, visit
www.ProfitableInvestingTips.com

Predict the Next Bitcoin Price Plateau

More Related Content

More from InvestingTips

Recently uploaded

Predict the Next Bitcoin Price Plateau