Based on the breach of the 200 and the closing in on the March 25, 2017 and the 300 weighted MA we're likely to see some heavy support along this price level.
Current order positioning suggests the market will be balanced between 8k and 8750 unless a trigger comes along to push it lower (aka FUD).
Technical indicators and historical probability strongly suggest an eventual push to the $6k level but heavy support in the $7500-$8100 price range would suggest at least a month duration before seeing that price level unless some FUD triggers another panic. Current market conditions do not favor growth as regulatory concerns, the high frequency of scams, and malinvestment/speculation in shitcoins (aka XRP, TRX , etc.) will likely continue pushing the market towards consolidation before reversal. History shows that BTCUSD needs to hit around 30% of its ATH before reversing reliably. That would indicate the $6k price level based on the recent ATH of about $20k.
Current order positioning suggests a 50/50 probability of price movement in the range between $7.5k and $9.2k (GDAX) in the very near term (i.e. today). Given upside potential on a long position of 140% off the mid-point of this range over a 6-12 month duration and downside potential of 40% with a weighting of 60% to the downside and 40% to the upside, this results in a probability based gain of around 25% or roughly 1:4 risk / reward.
Depending on the chart and order book analysis it may not be prudent to enter the market at $7.5k unless we see that price before Feb. 4, but generally speaking a long position of about 25% of your trading fund would have a high probability of generating a return over a 6-12 month duration.
In general an allocation of 60-80% of funds to fiat for trading shorter duration swings in price will be likely to generate profit over the short to intermediate duration (1-2 hours up to a month if necessary) due to how close we are to a reversal. This could depend significantly on the regulatory environment and Feb. 6 will be a major event as SEC Chair Jay Clayton talks about crypto with the US Senate and this could strongly influence price action based on statements made that day.
If I were you I would watch the hearing live on Feb. 6 10 AM (EST):
and make appropriate trades based on sentiment gained from the hearing. My guess is that any hint of negative sentiment will trigger lower prices while ambiguity may lead to a mixture of false movements that could mislead you into thinking the market is strongly reacting one way or the other.
The SEC has generally been fair in avoiding market moving actions as they gently warned the crypto community with a letter and let the DAO off the hook by not categorizing as an unregulated security. However, enforcement action is trending dramatically higher, and any highly speculative crypto investments (such as BCC , TRX , XRP) with questionable leadership should be held with caution. Given the prominent role of ETH in the ICO market it might be a good time to rebalance your holding with some NEO which appears to have a strong team and a heavy emphasis on compliance, self-regulation, and accountability.
It might be worth trading in the $8150-$8500 range for 2+% gains over the next few days. Should price build momentum above $9k then we could see a symmetrical triangle form around the $9k level. If price reverses around $9k-$9,050 then the triangle will be around $8660-$8700 with a much shorter duration.
This could all be interrupted by whatever happens in the next few days or the SEC Jay Clayton Senate hearing.
Just based on order positioning the bearish sentiment is significantly greater than bullishness at the $8900-$9700 price level. Given the current momentum in the market maybe we'll see a push above $9k, but I wouldn't want to buy at $8800+ to find out.
With the strong support/resistance between $8800 and $9k I can definitely see a symmetrical triangle forming, but if there isn't much price action between now and Sunday morning I can see this SEC hearing knocking things out of that pattern. The probability will be relatively high for a breakout lower after that hearing but perhaps only a quick bounce to the $7.8k-$8k level as bulls push for the March 25 trendline. If that trend doesn't hold then it will remain to be seen if the lower channel trendline can hold. It seems relatively probable that we'll see a few days of sideways price action from $8k after the hearing possibly creeping along the Mar. 25 trendline before a break back to the $7.5k level which will hopefully bounce off the lower channel trendline back towards the center of the symmetrical triangle (hypothetical) around the $8.6-$8.7k level.
It helps to have a clear trading plan with multiple sets of price target entry and exits and probability based order sizes written down when the market gets crazy so you don't get overwhelmed by the urge to act impulsively (or stupidly) and go off script.
I don't really see enough buying pressure to push past $9.5k but who knows... weekends can be completely unpredictable. Order positioning above $9.6k suggests strong resistance between $9.6k and $10k.
Since Thursday the market has lost 25% and regained 25% in 2 days. Hopefully some of the weak hands in this recent dip will learn to better allocate their portfolio so they don't have to panic sell every dip.
Notably, when the market hit $8k on Thursday, GDAX traders were panic selling to $7500 while the rest of the market appeared to be buying anything below $8k which caused a massive spread of around 5%. This suggests to me that GDAX/Coinbase users have a lot of weak hands who don't really understand the market or were generating market orders that pushed prices lower. Perhaps Coinbase should refine their buy/sell mechanism so price discovery is more transparent for non-GDAX users.
LTC has bounced pretty significantly in BTC terms, which suggests consolidation to LTC. ADA also bouncing pretty strong in BTC terms which doesn't mean much other than it probably got oversold in this latest correction.
NEO looks to be correcting in BTC terms, which suggests a more prolonged decline as it comes off its ATH.
Given the amount of XMR now being circulated by criminals and hackers and how much of the network is being mined by rogue operators I can see some potential for negative price action as a result of bad actors trying to launder their funds with BTC.
Not sure it would be prudent to make any trades on a reversal of this high. An ideal target for entry would be between $8250 and $8500 within the next 12 hours with an exit between $8700 and $8900 depending on order positioning by Monday morning in the US.
There still appears to be enough order volume positioned at $8900 to keep this bouncing around for a while but this is all pennies in front of the steamroller. Any kind of trigger could push things lower. The market is definitely in a bit of a lull right now and the SEC hearing could shake things up again.
In general a trade at $8500 still poses relatively low longer term risk and good risk / reward even if it ends up being a "hodl" through another 30% dip as market positioning appears to reflect. The next big buy wall has now pushed to $7500 and there could be some bigger trade opportunities between $7.5k and $8.5k depending on market signals and external triggers. Overall, a lot of bullishness still sits below the $6800 price level so this weak rally might play out over a two week period like before or perhaps some negative trigger will wreak another round of chaos and a period of bouncing around between $5.5k and $8k will trigger an overall reversal (that could require a lot of volatility over a period of 2-3 months).
Volume has completely dropped off a cliff so this slow ride down could turn into a battle to break $9k over the next day or so. Not really a great place to buy and not exactly huge short term opportunities here so it makes sense the volume will dip hard again until there is something to trade about.
Hopefully the market can weed out some of these bad actors that are hurting its reputation but the real test here is can the community tolerate censorship resistance while many known bad actors are using the coin to commit crimes?
However, XMR generally still has more favorable upside potential in my book and my expectation is that LTC will take another big dip down in USD terms when BTC goes for what seems like a highly probable final correction before reversing.
Market decidedly bullish above $8380 right now and 24 hour BTC volume looks like it could dip below $1 B. Probably could make money trying to buy around $8.6k and selling around $8.9k, so another 2-3% gain.
Given the low volume anything could happen in the next 12-24 hours.
Not really much on the chart to guide you and given the low order volume anything could happen. I'm not likely to enter a trade above $8.5k BTC or $125 LTC.
Buying pressure is growing above $8320-8350 but this could positioning could pull back to drag price lower so probably safe to wait for some clearer market signals.
Probably will see price action between $8250 and $8450 for some time so not the worst trade but less than 2% and on low volume, which means this price action could dry up at any time.
Looks like we got a bounce off $8.5k at 7:30 AM EST that bounced to $8.8k+ (3.5%+ gain) in 1.5 hr so it appears the biggest bounce happened at $8.5k then after the second touch off $8.8k buyers pulled off to around $8.3k
It looks like if you bought in at $8350 you could have exited at $8550 for a 2+% gain. Not bad, but also not a lot of volume so a fairly narrow risk window for entry and exit.
It looks like this battle between $8.3k and $8.5k will continue for a while so I'm taking a break.
Patience and discipline are key to making money. If you're not taking profit then you're not winning your trades.
Still a bit premature to project that so we'll see. Panic selling seems to have eased quite a bit but as usual, weekends have become one of the favored times to buy dips and/or panic sell at exactly the wrong price level.
A backtest of this simulation could prove it to be a terrible idea given an upward trending market, but maybe a great idea in a downward trending market.
Given that the expected dip off this ATH will be close to $5500-$6000 we shouldn't expect a quick retrace back to $20k. Considering that Bitcoin has moved from 80+% of the total crypto market cap to less than 40% we should expect a move back to the ATH to take significantly longer than 9 months unless institutional investing increases dramatically at the bottom of this current downtrend.
Many of these new "hedge funds" for crypto should be buying up hundreds of millions in Bitcoin as we reach the lower percentiles of where a reversal will be expected. Granted this might be too much volatility for these funds to endure but essentially hedge funds will be colluding to a degree by signaling that they will stay in the market to preserve the overall valuation.
Lately, the signaling has been negative as Novogratz called off his hedge fund.
I should also add that even though Tom Lee thought $9k was the bottom he apparently didn't look at the data showing the percentage of time Bitcoin spends below its ATH, which would have indicated a greater than 50% probability of a move to $5500-$6k. This shakes my faith a bit in Tom Lee's models, and the low on-chain transaction volume also worries me.
But this points to the diversificaiton of crypto that's happened in the last 10 months where nearly everything has blown up and hit $1 B+ market cap. This would suggest some real utility with coins like LTC, XMR, DASH (bleh), ETH, and genuine interest in up and coming ones like XLM, NEO, ADA and a few others I don't particularly like...
Not really sure how to optimize for that...
History of Price Manipulation in Bitcoin Markets
Here's a nice article from a few years ago.
Key here would be to anticipate the target margins (i.e. ~2%) and try to beat the bot in entering and exiting each time. Then you can benefit from the bot's manipulation while getting out before it starts to game the prices again.
In some ways a centralized liquidity mechanism would help negate this bad behavior and allow prices to be driven more by actual human usage. If crypto prices are nothing more than bots buying and selling to each other in some meaningless stochastic dance and they essentially control the Bitcoin market, then that completely destroys the premise of a decentralized, censorship-resistant network because some deep pocketed organization or individual is using their leverage to influence prices, which effectively subjects everyone on the network to their control.
This bot probably knows that when volume is at a certain level, the strategy that it uses will not be effective as it generally works best in the middle of the night when volume is low.
A safe bet would be to expect a retest of the previous low around $6.5k
If we consider that final dip was 20% off the 300 day WMA then it would be reasonable to think that buying at $6500-$6900 will be "safe" based on 2 year price action. However, I don't have data showing much prior to this time period, so the duration for price action to hang low could be relatively high and we could see moves back to $4k even simply based on that being about 80% draw down from the ATH.
However, anything below $8k should be reasonable risk reward over a 2-6 month timeframe though equity market volatility could be a consideration here as expectation of higher interest rates seems to have a mixed effect or even depressing effect on crypto prices as crypto isn't exactly a "safe haven" rather a speculative store of value that becomes enhanced during periods of low interest rates.
Even with a decent rally once this bottleneck clears at $7171 we're almost certainly revisiting the $6k-$6.5k levels again at least once before the next big bounce.
Either way, it's a game of chicken that commits you to a prisoner's dilemma type outcome due to information asymmetry.
If you know the big sell train is coming then you can choose one of two options 1) get out of the way of that train by exiting in front of that sell price and avoid the likely outcome of price declining or 2) call the bluff which will likely result in your fatality since others are probabilistically likely to be jumping out of the way. So either way, you lose, simply because the train is bigger and unless you're more or less a wall of equal strength to stop that train then you have no choice but to comply.
This works in the opposite direction as well with a "buying" train. You can either get left behind or you can jump on the train early as it signals its arrival, further increasing the probability that you will "win". So again your choice is to either comply or put up a wall of equal strength to stop the train.
This plays out into who will then have the biggest train or wall? Eventually it will be come down to a 50+% type of attack and a knowledgeable player will be able to see that they will sabotage the entire game for everyone if they continue following these incentives. So for example the Winklevoss Twins and maybe Satoshi Nakomoto keeping their wallets more or less unspent could possibly prevent this outcome or at least create negative incentives for those who are trying to play into that outcome.
I made some mistakes trading the last few days by failing to identify the proper exit for a few trades and instead of making money I'm in a 1:1 risk/reward position... key takeaway is don't be greedy and be ready to exit quickly in a downward trending market if your target doesn't get hit.
"The market cap of other cryptocurrencies surged by even
more. In the one year period ending in mid-May 2017, the market value of cryptocurrencies
excluding bitcoin surged from 1.7 Billion USD to more than 29 Billion USD . That is an
increase of more than 1,900 percent. Similar to the bitcoin market in 2013 (the period we
examine), markets for these other crytocurrencies are very thin. Our analysis suggests that
manipulation is quite feasible in such settings."