Bitcoin price has fallen to a value as low as $36250 which is almost 6% from the high of $39291. This drastic fall in the cryptocurrency has reduced the value in the Crypto sector after a jump in May. Just after a tweet from Elon Musk, this downfall took place which is an indication of the world's substantial macroscale cryptocurrency. So the price analysis forms an important aspect for investors to decide which currency to invest in. Through Technical Indicators, we are able to find out why there is such a downfall in the Crypto sector.
Technical Indicators to Forecast Price Movements
As far as technical analysis is concerned, indicators like Bollinger Bands, RSI, Stochastic Oscillator, and Moving Average EMA.
Bollinger Bands
These bands are an important indicator for finding out whether Bitcoin is trading outside of its usual levels. They are used mostly as a technique to forecast long-term price movements. It is considered a good indication when the stop and reversal points move below the price of an asset. When the SAR points go above the price of a specific asset, however, it might be seen as a negative indicator. By combining the Bollinger bands with the stop and reversal system, we can infer that when volatility spikes, there is a greater likelihood that Bitcoin would rise.
We may infer that if the Bollinger bands and the stop and reversal system are combined, there is a greater likelihood that Bitcoin will rise when volatility returns.
Relative Strength Index (RSI)
RSI is quite helpful for traders to track the bitcoin market. This is because it detects market conditions and raises warning flags for big and sudden fluctuations in price movements.
When the RSI goes above 70, that means bitcoins have been overbought. In the same way, if the Relative Strength Index falls below 30, it indicates that bitcoin is oversold. When the RSI reaches 70, a retreat is almost inevitable. When the RSI reaches 70, a retreat is almost inevitable. Overbought conditions, on the other hand, provide an opportunity for traders to earn profit. At the same time, if there is a negative price movement, traders can achieve a short profit.
Furthermore, the RSI is more likely to assume a position between 40 and 90 in an upswing. Prices are more likely to adopt a position between 10 and 60 during a downturn.
Stochastic Oscillator
If you rate on a scale of 0-100, the Stochastic Oscillator can depict an oversold market with a low reading of around 20. However, if the market is overbought, the indicator will show a value closer to 80.
The above chart clearly indicates bitcoin dropped 11% after the indicator generates a sell signal on June 9. Moreover, it rallied more than 8 percent after the chart shows a buy signal on June 29 (green arrow). Please take into consideration that stochastic tends to work best in broad trading ranges or mostly in slow-moving trends.
Moving Average
MA is one of the crucial indicators used in Bitcoin price prediction. If the slope of MA is in a rising phase, it indicates Bitcoins are in an uptrend, and prices are likely to rise. At the same time, if the slope of MA is in a declining phase, it signifies Bitcoins are in a downtrend, and high chances of price decline.
In the below diagram, it is clearly evident that the price of Bitcoin triples after the 9 MA rises above the 50 MA on the 1D chart and forms a bullish cross.
Bottom Line
Shorting Bitcoin is a good method to avoid irregular price movements through hedging. You can earn a lot when the market is rising. However, you need to take smart move to make money off when the price is falling. So, understanding technical Indicators and charts will help in understanding when to take positions in the market.
Official Promotional Partner
Official Coverage Partner
A really interesting take on the price analysis of bitcoin ! 😀